This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Whole Foods: 'Food For Thought' or Wholly Expensive?

NEW YORK ( TheStreet) - Warren Buffett once said "Price is what you pay, value is what you get." While I understand "the Oracle" was referring to individual stocks, I've recently realized that this maxim is especially true while shopping at stores such as Whole Foods (WFM - Get Report), a company that has been given the nickname "Whole Paycheck" due largely to its premium prices.

Nonetheless, amid a sluggish economy that has hurt food stocks such as Chipotle Mexican Grill (CMG - Get Report), Whole Foods continues to enjoy a stock valuation that presumes growth will continue for the next 10 years. Is it still a good bet?

A Good End to a Great Year, but...

For the period ending in September, Whole Foods saw its net income increase to $112.7 million, or 60 cents per share -- representing a year-over-year increase of 42% from the $75.5 million earned in fourth-quarter of 2011. Likewise, revenue for the quarter were solid -- increasing 24% to $2.91 billion. The company beat on both its top and bottom lines as analysts were expecting profits of 59 cents per share on revenue of $2.90 billion.

Impressively, despite what has been a difficult economic climate, the company continues to demonstrate solid growth as comps increased 8.5% while identical store sales were up 8.3%. Profitability also continues to impress. In terms of gross margins, Whole Foods logged a year-over-year improvement of 80 basis points. While a slight drop in gross margins from the third quarter might raise a few eyebrows, it was not unexpected.

The company has been working hard trying to figure out ways to increase its foot traffic. One of the ways was to execute the Wal-Mart (WMT - Get Report) strategy and utilize its own margin leverage to offer lower prices. Given that the company's operating income grew by almost 50% year over year, I would say that this approach worked pretty well.

Overall it was a solid performance. Unlike many of its peers, the company made a strong showing, completing its fiscal year earning $465.6 million, or $2.52 cents per share -- a 30% improvement from fiscal year 2011. Still, this was not enough to keep investors from selling off the stock, which followed after management's Q1 guidance.

Sandy Brings Caution

The company said revenue for the first five weeks of the current quarter has been adversely impacted by Hurricane Sandy. As a result, investors should expect a one-time charge in Q1. But the company stopped short of revealing to what extent -- only to say that it is working with its insurance company to assess damages, results of which might not be reveled for several months.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
CMG $646.23 -0.66%
WMT $81.22 -1.30%
WFM $51.34 -1.40%
AAPL $123.85 -0.47%
FB $81.35 -1.10%


DOW 17,699.35 -76.77 -0.43%
S&P 500 2,056.41 -11.48 -0.56%
NASDAQ 4,863.1930 -37.6920 -0.77%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs