The changing consumer behavior and growing demand for quality organic food are impacting giant grocery stores, and Whole Foods Market (WFM, Financial) is no such exception in this. The company has entered the new fiscal year with a strong improvement in its key metrics, and is looking well-positioned to perform better in the future. The main reason behind its upbeat performance is the lower price strategy that it undertaking, which has led the company to attract new customers.
Focusing on cost reduction
Whole Foods Market is further planning to reduce prices and adding more store-branded food which will further accelerate its growth momentum.Ă‚
Whole Foods' quarterly revenue improved by 10% to $4.67 billion which is also in line with the consensus estimates. The growing demand for organic foods also triggered its sales and as a result, Whole Foods’ sales grew by 4.5%. With this growth in the sales, the company is expected to gain good market share in the upcoming quarters. In fact, the company’s shares also surged by 3.3% soon after it posted strong results and indicated its strong long term prospects. On the earnings front, on the quarterly basis, Whole Foods’ EPS soared by 9.5%, beating the analysts’ estimates marginally.
Smart moves
The Whole Foods Market is has not always been the same as it is now. The company had been struggling in the past due to the stiff competition from its rivals such as Walmart Stores and Kroger. But the company has shown an impressive turn around and with its price cutting strategies it has reached this milestone and is now a better stock to pick as compared to its rivals. It is further increasing its focus on its strategies and is looking for a better financial performance in the coming quarters.
Whole Foods Market wants to drive its sales further and in order to attract new customers, it is now providing fresh grocery delivery options to more homes in America as compared to any other player in the league. This online delivery is further supported by Whole Foods’ 15-market partnership with Instacart. This activity by the company can be key growth driver of its online delivery in future as well.
Whole Foods Market has also come up with unbeatable strategy for Valentine's Day in which it is offering flower delivery under one hour at attractive prices. The customers can also make an advance booking for this service. Furthermore, on the mobile platform its Whole Foods Market app is seeing good response in the market which can be seen by more than 600,000 downloads.
It is taking many innovative steps to stand out in the industry and this will also attract new customers to it. The company has expansion strategy and with 400 stores now, it is planning to expand to 1,200 stores. These new stores will furnished with beer gardens on the roof. This is not enough as the company is also putting efforts to renovate the older ones by adding unique elements such as brewery. This will be a strong step by the company to attract more customers.
In addition, Whole Foods Market wants to stick to its strategy of lower pricing. The company now wants to appeal to a broader class of customers by shaking its pricey image. This will be an added advantage to the company as customers are much health conscious and want to buy best quality organic products.
Conclusion
Whole Foods has a trailing P/E of 36.09, and the forward P/E of 29.17 shows good growth in the earnings in the near term. But in the long term, the company’s earnings are not so impressive as the earnings are growing at a CAGR of 13.25% which is marginally less than industry average of 14.27%.Â
