Whole Foods Cooked

Stock quotes in this article: WFMI , OATS , SWY  

It seems far-fetched that the FTC would block the deal as anticompetitive while the company is admitting to being stung by competition (although that acknowledgement might not be an accident). So, I do believe this deal will go through. However, just because it gets completed doesn't mean it's a slam dunk. Whole Foods may be biting off more than it can chew.

Whole Foods is a great company. Management is top-notch, and personally, I love to shop there. But like so many hot retailers before it, there comes a time when the bar has been set so high that there's no way the company can continue to match its prior accomplishments, simply due to size.

Even including the after-hours selloff, the stock is trading at 29 times consensus estimates, which will certainly come down -- as will its expected growth rate. Until Wild Oats is integrated into the company and management has a clearer idea of what its contribution will be to the bottom line, I believe the stock should trade down to $35.

Whole Foods is still a good business and will continue to put food on the tables of its employees and millions of customers. But its days as a highflying growth stock are over.

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In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.





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