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Whole Foods Is Not Alone Anymore

NEW YORK ( TheStreet) -- The recent consumer shift towards organic and natural foods has certainly improved the profile and popularity of Whole Foods Market (WFM - Get Report), whose name within the retail sector has always been associated with health and wellness.

While that reputation hasn't exactly changed -- and there is ample evidence that this new healthy-eating lifestyle among Americans is here to stay -- Whole Foods no longer corners the "health market." I fear this fact is not yet reflected in today's share price.

I'm not discounting the fact that Whole Foods is a well-run company, one that operates at a high rate of efficiency. But at the same time I'm not willing to ignore that chains such as The Fresh Market (TFM) and Natural Grocers (NGVC) have done quite well for themselves in a relatively short period of time. Not to mention Sprout's Farmers Market (SFM), which sprouted out of nowhere to post 24% revenue growth and strong margins.

If that was not enough, when you couple these new arrivals with the fact that "regular" retailers including Wal-Mart (WMT) and Target (TGT) have targeted this market by now offering organic and healthy options at discounted rates, I envision that somewhere down the road Whole Foods will be relegated to being "just another organic retailer."

This doesn't mean the company won't still be successful. Without a crystal ball there is really no way for me to say that when that time comes that Whole Foods' management would not have found new growth opportunities. My issue, as I've said, is today the stock -- which trades at a price-to-earnings ratio of close to 40 -- is expensive.

While management has certainly fed the Street's insatiable appetite for growth, there will be a point when, say, Wal-Mart decides it wants to apply more pressure on Whole Foods' margins. Let's assume that I'm slightly overestimating Wal-Mart's capabilities -- there's still Target, which has just as good an infrastructure and resources to squeeze out Whole Foods with competitive market/promotions.

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