Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM): Add This Grocer to Your Portfolio for Healthy Returns

Organic food is “in” now. Consumers are becoming more health conscious and are preferring organic and natural-food products over fast food. The organic food industry has been growing rapidly by 10% every year, contributing more than $30 billion to the U.S. market alone. This is certainly good news for the undisputed king of organic food grocers–Whole Foods Market, Inc. (NASDAQ:WFM). Shares of Whole Foods Market, Inc. (NASDAQ:WFM) increased by around 10% on May 7 as the company announced strong second-quarter earnings. Below, I have listed two reasons why investors should add this organic grocer to their portfolios.

1. Expansion plans

Whole Foods Market, Inc. (NASDAQ:WFM) has solid expansion plans in order to increase its market share. It plans to increase its stores count from 349 to 1,000. The company acquired the leases of six Johnnie’s Foodmaster stores in the greater Boston area last year and has also been exploring untapped areas like Maple Grove, Minn. and Detroit. It continues to demonstrate a high return on invested capital, even in its oldest stores, and has also reported a 19% return on invested capital in the second fiscal year of a new store opened. The new store openings will help Whole Foods Market, Inc. (NASDAQ:WFM) increase its brand recognition in the markets and will boost economies of scale.

2. Solid financials and a shareholder friendly company

Whole Foods Market, Inc. (NASDAQ:WFM) recently reported second-quarter results in which its comparable sales increased by 6.9% and revenue increased by 13.4%. Whole Foods Market, Inc. (NASDAQ:WFM) has been experiencing rising revenue and shares. Its revenue increased from approximately $9.4 billion in December 2010 to $12.5 billion in March. In 2012, the company experienced a 19% increase in its free cash flow. With almost negligible long-term debt, the strong financials makes it attractive to investors.

Whole Foods is a shareholder friendly company—continuously rewarding its investors. In the first quarter this fiscal year, its board announced an increase in its quarterly dividend by 43% to $0.20. The company also announced a new share-buyback program of $300 million by December 2014.

Peer analysis

The awareness and demand for organic food has been on the rise, and as a result this industry has become heavily competitive. Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) by Vitamin Cottage  and The Fresh Market Inc (NASDAQ:TFM) are some key players of this industry.

With around 130 stores, The Fresh Market Inc (NASDAQ:TFM) has been focusing on expansion.