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.