Is Whole Foods Market, Inc. (WFM) the Next Costco Wholesale Corporation (COST)?

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At a glance, two recent retail success stories, Costco Wholesale Corporation (NASDAQ:COST) and Whole Foods Market, Inc. (NASDAQ:WFM) don’t seem to have much in common. One sells everything from potato chips to flat-screen TV sets out of a no frills big box club store, and the other sells organic produce and gourmet foods from a fancy supermarket.

Whole Foods Market, Inc. (NASDAQ:WFM)

Yet the two retailers have a few things in common: rising revenues, share prices, and sales. Between November 2010 and May 2013, Costco Wholesale Corporation (NASDAQ:COST)’s revenues went from $72.38 billion to $104.89 billion. Whole Foods Market, Inc. (NASDAQ:WFM)’s revenues went from $9.37 billion in December 2010 to $12.52 billion in March 2013.

Whole Foods Market, Inc. (NASDAQ:WFM)’ same store sales increased by 6.6% in the first quarter, and Costco Wholesale Corporation (NASDAQ:COST) reported that its same stores rose by 5% in May. The increases are pretty similar, aren’t they? What’s going on here? Why are these two retailers doing great while bigger players such as Wal-Mart are reporting anemic sales? Could some of the same factors be driving the two company’s sales?

What Whole Foods Market, Inc. (NASDAQ:WFM) and Costco Wholesale Corporation (NASDAQ:COST) have in common

Whole Foods Market, Inc. (NASDAQ:WFM) and Costco Wholesale Corporation (NASDAQ:COST) do share some characteristics that investors might not see. These characteristics are:

Both chains cater to upper middle class shoppers who like to get the most for their buck, but dislike traditional discounters. These shoppers also value their time. They go to Whole Foods Market, Inc. (NASDAQ:WFM) and Costco Wholesale Corporation (NASDAQ:COST) because they know they won’t waste time there.

Both Whole Foods and Costco are likeable. People like both chains and enjoy shopping at them. We should not dismiss likeability as an asset; it has turned a wide variety of companies ranging from Volkswagen to Apple to Bank of Internet into great investments. Likeability is one of the best assets that a retailer can have because people will spend more money at a store they like.

Whole Foods and Costco both emphasize a strong ethical vision and a definite set of values. This appeals to certain high income shoppers and increases customer loyalty. It also makes the two stores more likeable.

Both retailers go out of their way to be liked and create an enjoyable shopping experience. Shopping at either store can be fun; shopping at Wal-Mart and traditional grocers is often a hassle.

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