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Is Whole Foods Market, Inc. (WFM) a Buy?

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Whole Foods Market, Inc. (NASDAQ:WFM)For many shoppers, Whole Foods Market, Inc. (NASDAQ:WFM) has changed the grocery-store experience. The Austin-based chain, founded in 1980, offers a carefully curated selection of some of the finest natural, organic and artisan foods. A bevy of bulk items, bakery goods, beers and body products are also available.

No longer is grocery shopping a chore. Whole Foods Market, Inc. (NASDAQ:WFM) has made it fun, adventurous and a gastronomic journey in leading a healthy lifestyle. While the stores are more upscale than traditional food stores and prices are steeper, Whole Foods’ 365 Everyday Value line will “fill your pantry without emptying your pocketbook.” Yet Whole Foods Market, Inc. (NASDAQ:WFM) shoppers are willing to shell out more for quality goods.

Investors, too, are willing to pay more for a quality investment, and they have been rewarded for holding Whole Foods shares.

The company recently padded investors portfolios after reporting hearty fiscal  second-quarter earnings. The chain posted a 6.9% increase in same store sales for the second quarter. Profit rose 20% to $142 million, or $0.76 a share.

The largest U.S. natural goods grocer boosted its 2013 forecast to $2.89 a share, said sales for the current quarter are running at a hearty 9%, and reported it will triple its store count to about 1,000.

Wait — there’s more. Whole Foods Market, Inc. (NASDAQ:WFM) also announced a 2-for-1 stock split that will occur May 29. Companies like their stock to trade in a “sweet spot,” and won’t split shares if they think there is a good probability the price will fall back to that sweet spot on its own accord. That’s why [forward] splits are a bullish signal from management.

Investors ate all the news up and sent shares soaring 10%, or $9.39, to $102.10, following the release. It was the stock’s biggest jump in nine months.

Natural and Organic Food Industry Poised for Growth

In the wake financial meltdown of 2008, consumers grew cost-conscious. The natural and organic food industry was hit especially hard. But with consumers currently growing more comfortable about their finances and the state of the economy, they are starting to spend more for “quality” foods.

Indeed, the organic food industry is expected to grow by 50% over the next five years in the United States alone, according to business information company Market Line. This year, the organic/natural food industry is expected to grow a robust 8%. In comparison, the market for conventional food is forecast to grow at a meager 2%.

As a result, a plethora of the nation’s largest supermarkets are racing to add “pure” foods to their lineup. Many are even launching their own brands as this segment of groceries is far outpacing traditional grocery sales.

That’s good news for consumers. Strong growth and increasing popularity like that will eventually bring down natural food prices as competition heats up.

Sector Rivals

One retailer jumping on the natural-foods trend is The Kroger Co. (NYSE:KR). The Cincinnati-based grocery store chain has seen its natural foods division double over the last five years and is committed to expanding offerings in this segment.

In some 1,300 of The Kroger Co. (NYSE:KR)’s 2,500+ stores are Nature’s Market, stores within the store focused solely on natural foods. Everything here is natural.

Going natural is just one way the No. 2 U.S. grocery chain plans to juice its stock. The Kroger Co. (NYSE:KR) has spent plenty of its capital expenditures on research to track customer behavior in an effort to keep shoppers in stores longer and get them spending more. Ambitious share buybacks will also help the stock.

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