Is Whole Foods Market, Inc. (WFM) Paycheck Now Half Paycheck? – Safeway Inc. (SWY), The Kroger Co. (KR)

Published on March 12, 2013 at 1:45 pm by The Motley Fool in News

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If even Whole Foods’ margins are going to be challenged and the growth slows, the supermarket sector will be a difficult place to park your shopping cart of stocks (or your green mesh bag). Whole Foods had annual growth of up to 44% over the last five years, but analysts see that being cut to 18.68% five year annual EPS growth (yoy). At its current P/E of 32.33 with a forward P/E of 25.21 and a yield of only .90%, other grocers like Safeway are reaping the bullish sentiment. Even at a 52 week high Safeway’s P/E is only 10.12 with a 2.90% yield. Those are Apple Inc. (NASDAQ:AAPL) -like numbers, except for the margin and the growth, of course.

After the Q1 earnings call on Feb. 13, Wells Fargo reiterated its Outperform on the stock, attributing the weakness in Q1 and Q2 same store sales numbers to the payroll tax increase. However, in my opinion the people least likely to be affected by that have traditionally been the ones shopping at Whole Foods.

Abandon Your Cart?

Any number of analysts are saying the selloff is a good entry point. Whole Foods said on the call that they’ve have been containing costs better and that rents in general have been lower and margins have expanded. Like Wegman’s, it is a destination shopping experience. It is like the Starbucks of grocery shopping, a cool place to see and be seen. It is still one of the better stocks on any metric for socially responsible investors with the best benefits for its employees and a huge commitment to fair trade and the sustainability of its sourcing.

The stock may continue to be pressured, but as a long term buy taking advantage of the selloff in Whole Foods might not be a bad idea. Safeway isn’t a bad idea either as a yield proposition, but The Kroger Co. (NYSE:KR) should remain a wait-and-see to reaction after earnings.