Supermarket Stocks Turn Stale on Monday

NEW YORK (TheStreet) -- Grocery store stocks were scrapped from investors' shopping lists, causing an industry-wide sell-off during Monday's trading session. The sector is likely suffering from depressed store traffic affecting the retail industry and as winter storms across the East Coast and Midwest push logistical costs higher.

The industry's loss leader Whole Foods Market (WFM) had shed 3.6% to $54.24 by late morning. Wisconsin-based Roundy's Inc (RNDY) dropped 2% to $9.91, Sprouts Farmers Market (SFM) plunged 2.4% to $36.71, and Safeway  (SWY) lost 1.2% to $31.94.

TheStreet Ratings team rates WHOLE FOODS MARKET INC as a Buy with a ratings score of B+. The team has this to say about their recommendation:

"We rate WHOLE FOODS MARKET INC (WFM) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WFM's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WFM's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
  • WHOLE FOODS MARKET INC has improved earnings per share by 6.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WHOLE FOODS MARKET INC increased its bottom line by earning $1.47 versus $1.26 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $1.47).
  • 38.41% is the gross profit margin for WHOLE FOODS MARKET INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.06% is above that of the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 7.3% when compared to the same quarter one year prior, going from $112.73 million to $121.00 million.

TheStreet Ratings team rates ROUNDY'S INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate ROUNDY'S INC (RNDY) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry. The net income has significantly decreased by 52.5% when compared to the same quarter one year ago, falling from $7.93 million to $3.77 million.
  • The debt-to-equity ratio is very high at 3.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food & Staples Retailing industry and the overall market, ROUNDY'S INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ROUNDY'S INC is currently lower than what is desirable, coming in at 27.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.38% trails that of the industry average.
  • ROUNDY'S INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROUNDY'S INC swung to a loss, reporting -$1.54 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus -$1.54).

 Also see: The 10 Drunkest States in America... and the 10 Most Sober.

More from Markets

Global Stocks Rise on Tech Resurgence; Dollar Past 3-Month High Ahead of Q1 GDP

Global Stocks Rise on Tech Resurgence; Dollar Past 3-Month High Ahead of Q1 GDP

AMD Rises Above the Competition; Loan Losses Mount for Big Banks -- ICYMI

AMD Rises Above the Competition; Loan Losses Mount for Big Banks -- ICYMI

McKesson Internal Review Clears Senior Management of Wrongdoing on Opioids

McKesson Internal Review Clears Senior Management of Wrongdoing on Opioids

Starbucks Surprises Wall Street With U.S. Sales Up a Paltry 2%

Starbucks Surprises Wall Street With U.S. Sales Up a Paltry 2%

Dow Jumps 238 Points as S&P 500, Nasdaq Also Climb

Dow Jumps 238 Points as S&P 500, Nasdaq Also Climb