Why I’m Not Worried About Whole Foods Market, Inc. (WFM)

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Yesterday, Whole Foods Market, Inc. (NASDAQ:WFM) came out with earnings and its forecast for the rest of the year. The market wasn’t pleased, as the company is down by as much as 10% today.

Below, I’m going to show you why long-term investors shouldn’t be worried about today’s dip, and at the end I’ll offer up access to a special premium report on the company.

Whole Foods Market, Inc. (NASDAQ:WFM)First, the good news
Earnings per share, that oh-so-important figure Wall Street likes to focus on, came in $0.01 ahead of expectations at $0.78 per share. On the whole, Whole Foods was able to grow earnings by 20% over the same time frame last year, and sales came in 14% higher, as well.

The company also opened a record number of stores during the quarter — 11 — and the build-out of stores looks to be ramping up, with over 100 stores expected to open over the next five years. That’s a big number, as it would increase Whole Foods’ presence by as much as 30% from its base of 345 stores today.

Now, the stuff that worried Wall Street
Comparable-store sales — which is a great metric to examine to see if people are buying more from existing stores — were up 7.5%. That’s a great number for any grocer, but some might be frustrated by the fact that the growth is slowing down over time. I’m not worried, though, as that’s bound to happen when comparisons from the previous year get tougher and tougher.

Another concern was the fact that the company doesn’t expect gross margins to be as good as they were last year. It’s fair for investors to be a little disappointed with that, but on the whole, management was very clear last year that the margins at the time were not sustainable.

Take a step back, though, and you’ll see that Whole Foods is head-and-shoulders above the competition in these categories.

Company Comparable Store Sales Growth Gross Margin Net Margin
Whole Foods (NASDAQ:WFM) 7.5% 35% 3.79%
Safeway (NYSE:SWY) 0.5% 26% 1.56%
Kroger (NYSE:KR) 3.2% 20% 1.45%
Harris Teeter (NYSE:HTSI) 2.5% 29% 1.98%
SUPERVALU (NYSE:SVU) (4.5%) 21% 0.02%

Source: SEC filings. All numbers reflect the most recent reportable quarter.

Of course, this isn’t exactly an apples-to-apples comparison, as SUPERVALU and its chain of stores are hardly competing for the same customers as Whole Foods. But Harris Teeter has gone a long way to make its in-store experience similar to that of Whole Foods, and Safeway has its “O” organics line to compete in the same arena.

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