Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM): Grocery Retailing Could Be Quite Appetizing

Whole Foods Market, Inc. (NASDAQ:WFM) has a much higher comparable store sales growth than The Fresh Market. In the past three years, its comparable sales growth were 7.1%, 8.5%, and 8.7% in 2010, 2011, and 2012, respectively. At $86 per share, Whole Foods is worth around $15.9 billion. The market values Whole Foods at as much as 13.7 times EV/EBITDA. Interestingly, The Fresh Market Inc (NASDAQ:TFM)’s EV multiple, at 13.6, is equivalent to Whole Foods’ multiple.

Kroger is still quite cheap

The Kroger Co. (NYSE:KR) has the longest history among the three companies. It is among the largest retailers in the world based on annual revenue, operating 2,424 supermarkets and multi-department stores, 1,169 of which have fuel centers. The Kroger Co. (NYSE:KR)’s fourth-quarter EPS of $0.88 exceeded analysts’ estimates of around $0.70.

In fiscal 2012, The Kroger Co. (NYSE:KR) generated around $96.75 billion in revenue, nearly $1.5 billion in income, and more than $2.8 billion in operating cash flow. The Kroger Co. (NYSE:KR) is trading around $34 per share, with a total market cap of $17.6 billion. Interestingly, despite the significant increase in share price since the beginning of the year, Kroger is still valued cheaply in the market, at nearly 6 times EV/EBITDA.

My Foolish take

The Kroger Co. (NYSE:KR) seems to be a good pick at its current price because of its lowest valuation and the highest dividend yield at 1.8% while Whole Foods Market, Inc. (NASDAQ:WFM) offers only 0.9% dividend yield. The Fresh Market does not pay any dividends.

If I have to choose between Whole Foods Market, Inc. (NASDAQ:WFM) and The Fresh Market Inc (NASDAQ:TFM), I would choose the former. Whole Foods, despite a high EV multiple, is still quite a compelling long-term investment opportunity due to its leading position in an organic retail niche market and a much higher comparable store sales growth than The Fresh Market.

The article Grocery Retailing Could Be Quite Appetizing originally appeared on Fool.com and is written by Anh Hoang.

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