Natural and organic-food grocery chain Whole Foods Market (WFM, Financial) ended the fiscal year on a good note, having reported better than expected results. The company posted a good improvement in earnings and revenue, beating analysts’ estimates. In fact, Whole Foods Market also gained market share.
As the organic food market is growing, Whole Foods Market might lose some market share due to competition. But, it is undertaking several initiatives to keep its growth strong. Let us take a look at some of the moves and overall business of the organic food grocery chain.
A closer look at the performance
In the recently reported quarter, Whole Foods Market’s revenue rose by 9.4% to $3.26 billion. This is commendable as compared to what it had posted in the same quarter last year. This was also in line with consensus estimates. On the earnings front, the company posted a 9% increment. The EPS came in at $0.35 per share, topping analysts’ estimates of $0.32 per share.
The organic food market is growing these days as customers are more health conscious. They are turning toward organic foods in large numbers. This changing customer behaviour is presenting amazing opportunities for organic grocery stores such as Whole Foods Market. The recent results by the grocery chain reveal that its products are continually gaining customer attention.
The company is now focusing on various other initiatives to improve its profitability. Initially, the company has already banned more than 75 ingredients which are commonly used in other foods. It is focusing on quality of the products and it is promoting ‘Values Matter’ initiatives to further address its customers.
Expecting better times ahead
With the improvement in the quality, the company is seeing strong performance across regions such as the Palm Desert California and Toronto, Canada. Whole Foods Market is making advances to attract more customers. In fact, the company has managed to conduct it well with unique community gathering places.
Whole Foods Market also has an aggressive expansion strategy. It has plans to add another 399 stores across 42 states and three counties. The growth of the company is robust and with the increasing demand for organic foods, Whole Foods Market is expecting these regions to be growth drivers for it in the coming days.
Moving on, the company has also entered into a partnership with Instacart to offer one hour delivery for 15 major U.S cities. This initiative will improve Whole Foods Market’s competitiveness. This will also increase satisfaction among customers. It can also recommend various products to customer, also enhancing the promotional activities.
It has also brought innovation in its services as well. For example, during the holiday season, it has started home delivery for high quality wines. With growth in technology, Whole Foods Market is also investing in various technological innovations. The company has participated in the Apple (AAPL) pay program, which led it to process more than 150,000 transactions. This will further improve the services attracting many customers which will drive its sales further.
Conclusion
Now moving on to the fundamentals, the stock looks reasonable with a trailing P/E of 29.95 and is showing positive signs of robust earnings growth with a forward P/E of 24.34. The growth momentum that Whole Foods Market is showing looks promising, and with growth and the changing customer behaviour, the company is expecting good market share gains in the coming quarters. So, considering all these facts, I would like to suggest that Whole Foods Market is a good pick as of now.
