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What Aided Whole Foods (WFM) to March Ahead of Its Industry
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Despite prevailing headwinds, Whole Foods Market, Inc. has outperformed the Zacks categorized industry as well as the related sector in the past three months. We noted that in the said time frame, the stock has advanced roughly 23.1%, while the Retail-Supermarkets industry has witnessed a gain of 12%. The Retail-Wholesale sector registered an increase of about 9.7%. Let’s delve deep to find what has made the stock resilient in spite of stiff competition, food price deflation, an aggressive promotional environment and waning store traffic.
Endeavors Instill Confidence
Whole Foods has been revamping pricing strategy, concentrating on value offerings and affinity programs, and unifying purchasing structure. These initiatives are to counter the heightened competition as more companies are entering and expanding their presence in the Organic & Natural food business. The players include The Kroger Co. (KR - Free Report) , Sprouts Farmers Market, Inc. (SFM - Free Report) and Wal-Mart Stores Inc. (WMT - Free Report) .
The company also expects to generate $300 million additional cost savings by fiscal 2020 on the back of supply chain efficiencies, and optimum utilization and standardization of labor force. For fiscal 2020, Whole Foods envisions total sales of more than $18 billion, comparable-store sales growth of over 2%, EBITDA margin of above 9.5% and cash flow from operations of over $1.2 billion.
We note that this Austin, TX-based company is leaving no stone unturned to reach its target customers, whether through national marketing and branding campaigns, home delivery services, store expansion or the adoption of a digital route such as the launch of digital coupon within its Whole Foods Market mobile app. Moreover, it introduced a new “uniquely-branded store concept”, "365 by Whole Foods Market". The new chain is equipped with innovative technology, compelling products at value prices and a modern look to target millennials as well as stave off competition.
With the launch of the “365” smaller format sister chain, Whole Foods intends to turn things around in its favor. However, analysts are concerned whether the new store model will prove to be a game changer and aid the company retain market share amid stiff competition without cannibalizing its own business. For quite some time now, Whole Foods has been working on lowering prices, upgrading technology and containing costs.
Hurdles to Overcome
Whole Foods has been grappling with waning comparable-store sales performance since the past seven quarters. The company witnessed a 2.8% dip in comparable-store sales during the second quarter of fiscal 2017, following a 2.4% decline in the preceding quarter. Comparable-store sales had fallen 2.6%, 2.6%, 3% and 1.8% in the fourth, third, second and first quarters of fiscal 2016, respectively, and 0.2% in the final quarter of fiscal 2015. Management expects comps to decline as much as 2.5% during fiscal 2017.
Further, the company reported in-line earnings during the second quarter of fiscal 2017 but it failed to contain the decline in the bottom line. We observed that after declining 14% and 6.7% in the third and fourth quarters of fiscal 2016, earnings per share plunged 15.2% and 16% in the first and second quarters of fiscal 2017. Whole Foods now envisions earnings per share of $1.30 or more for the fiscal year down from $1.55 reported in fiscal 2016.
Given the pros and cons embedded Whole Foods currently carries a Zacks Rank #3 (Hold).
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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What Aided Whole Foods (WFM) to March Ahead of Its Industry
Despite prevailing headwinds, Whole Foods Market, Inc. has outperformed the Zacks categorized industry as well as the related sector in the past three months. We noted that in the said time frame, the stock has advanced roughly 23.1%, while the Retail-Supermarkets industry has witnessed a gain of 12%. The Retail-Wholesale sector registered an increase of about 9.7%. Let’s delve deep to find what has made the stock resilient in spite of stiff competition, food price deflation, an aggressive promotional environment and waning store traffic.
Endeavors Instill Confidence
Whole Foods has been revamping pricing strategy, concentrating on value offerings and affinity programs, and unifying purchasing structure. These initiatives are to counter the heightened competition as more companies are entering and expanding their presence in the Organic & Natural food business. The players include The Kroger Co. (KR - Free Report) , Sprouts Farmers Market, Inc. (SFM - Free Report) and Wal-Mart Stores Inc. (WMT - Free Report) .
The company also expects to generate $300 million additional cost savings by fiscal 2020 on the back of supply chain efficiencies, and optimum utilization and standardization of labor force. For fiscal 2020, Whole Foods envisions total sales of more than $18 billion, comparable-store sales growth of over 2%, EBITDA margin of above 9.5% and cash flow from operations of over $1.2 billion.
We note that this Austin, TX-based company is leaving no stone unturned to reach its target customers, whether through national marketing and branding campaigns, home delivery services, store expansion or the adoption of a digital route such as the launch of digital coupon within its Whole Foods Market mobile app. Moreover, it introduced a new “uniquely-branded store concept”, "365 by Whole Foods Market". The new chain is equipped with innovative technology, compelling products at value prices and a modern look to target millennials as well as stave off competition.
With the launch of the “365” smaller format sister chain, Whole Foods intends to turn things around in its favor. However, analysts are concerned whether the new store model will prove to be a game changer and aid the company retain market share amid stiff competition without cannibalizing its own business. For quite some time now, Whole Foods has been working on lowering prices, upgrading technology and containing costs.
Hurdles to Overcome
Whole Foods has been grappling with waning comparable-store sales performance since the past seven quarters. The company witnessed a 2.8% dip in comparable-store sales during the second quarter of fiscal 2017, following a 2.4% decline in the preceding quarter. Comparable-store sales had fallen 2.6%, 2.6%, 3% and 1.8% in the fourth, third, second and first quarters of fiscal 2016, respectively, and 0.2% in the final quarter of fiscal 2015. Management expects comps to decline as much as 2.5% during fiscal 2017.
Further, the company reported in-line earnings during the second quarter of fiscal 2017 but it failed to contain the decline in the bottom line. We observed that after declining 14% and 6.7% in the third and fourth quarters of fiscal 2016, earnings per share plunged 15.2% and 16% in the first and second quarters of fiscal 2017. Whole Foods now envisions earnings per share of $1.30 or more for the fiscal year down from $1.55 reported in fiscal 2016.
Given the pros and cons embedded Whole Foods currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>