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 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.

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!
WFM $55.34 -0.34%
AAPL $128.54 -0.63%
FB $80.90 1.63%
GOOG $573.37 -0.05%
TSLA $202.44 1.44%


DOW 18,096.90 -106.47 -0.58%
S&P 500 2,098.53 -9.25 -0.44%
NASDAQ 4,967.1410 -12.76 -0.26%

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