Whole Foods Market“ Whole Foods, Whole People, Whole Planet ”

Hiroko Takashima

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U.S. sales of organic food and beverages is growing

• U.S.sales of organic food and beverages: $26.7 billion in 2010 (cf. $6 billion in 2000)

• Represented 7.7% growth over 2009 sales

• Approximately 4% of U.S. overall food and beverage sales in 2010

• Over 11% of all U.S. fruit and vegetable sales

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Whole Foods Market : Products & Services

• Founded in 1978 and is headquartered in Austin, Texas.

• Operating natural and organic food supermarkets

• Operated 316 stores (as of November 2, 2011)

– the U.S. (303), Canada (7), and the U.K (6)

• Annual sales: $10 billion in 2011• Full Time Employees: 48,200

[Shop sketch image]

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Whole Foods Market : Features 　

1. Specialty for natural and organic foods– Good partnerships with vendors and suppliers– Make a plan to open 1,000 stores in the U.S. in the future (CEO Walter Robb said)

2. Team Member Happiness– Ranked for 15 Years on FORTUNE's "100 Best Companies to Work For" List

• Provides health care at no cost to full-time team members

• All employees (except temporary) are eligible to receive stock options

• High salary (ex: Associate Store Team Leader $80,199/annual average)

3. Satisfied and Delighted Customers– Rely on word-of-mouth recommendations from the shoppers

– Connect with the customers through social media websites

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Features: Team Member Happiness• FORTUNE's "100 Best Companies to Work For" List 2012

http://money.cnn.com/magazines/fortune/best-companies/2012/

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Features: Satisfied and Delighted Customers

1. Rely on word-of-mouth recommendations from the shoppers– Spend much less on advertising and marketing, About 0.4% of the total sales

in fiscal year 2010

2. Connect with the customers through social media websites, in addition to e-newsletters, the corporate website and blog

– Over 2.1 million followers on Twitter

– Over 780,000 fans on Facebook

– Many stores have set up their own

Facebook and Twitter accounts

http://www.facebook.com/wholefoods

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Competitive Comparison in Financial Statement• Whole Foods Market

[Strength]– Higher revenue growth rate– Much higher margin

[Weakness]– Very high P/E ratio

　 Whole FoodsMarket

The Kroger SafewayIndustry :

Grocery Stores

Market Cap: 13.66B 13.87B 7.65B 8.53B

Employees: 48,200 338,000 180,000 81.00K

Qtrly Rev Growth (yoy): 12.2% 10.3% 7.1% 11.4%

Revenue (ttm): 10.11B 88.99B 42.84B 10.11B

Gross Margin (ttm): 35.0% 21.7% 28.6% 25.6%

EBITDA (ttm): 844.24M 3.94B 2.38B 844.24M

Operating Margin (ttm): 5.5% 2.6% 2.9% 3.9%

Net Income (ttm): 342.61M 1.18B 529.00M N/A

EPS (ttm): 1.93 1.94 1.48 1.6

P/E (ttm): 39.44 12.45 15.07 18.05

Source: Yahoo finance Direct Competitor Comparison (as of January 23, 2012)

• Competitor: Kroger, Safeway

[Strength]– Big enterprise scale

[Weakness]– Lower revenue growth and lower margin,

even less than the industry average

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Whole Foods Market: Stock Chart (for 2 years)

• The stock price (WFM) is going up with some fluctuation.

Source: Yahoo finance (as of January 23, 2012)

Raises FY 2011 Guidance; Raises FY 2011 Comparable Store Sales Guidance

Raises FY 2011 EPS Guidance

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Stock Chart Compare to Major Supermarkets (for 2 years)

• WFM stock price increased by over 150% (even though Costco increased by 50%)

• Other competitors’ stock prices fluctuated or remained steady

Source: Yahoo finance (as of January 23, 2012)

Whole Foods (WFM)

CostcoKrogerWal-MartSafeway

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Conclusion:

• Q1: Is Whole Foods Market undervalued or overvalued ?

• My opinion : In the long-term view, “valued price”

• Analyst opinion is below

Source: Yahoo finance as of Jan.25, 2012, Data provided by Thomson/First call

Price Target Summary 　

Mean Target: $77.82

Median Target: $80

High Target: $90

Low Target: $62

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Conclusion:

• Q2. Now is it a good time to buy Whole Foods Market ?

• My opinion: Yes! Why?1. Organic foods sales growth ($26.7 billion in 2010 <- $6 billion in 2000)

2. The company’s high growth performance and high margin (+1,000 stores in the U.S plan)

3. Employees’ great commitment (15 Years on FORTUNE's "100 Best Companies to Work For" List)

• Analysts opinion is below

　 Current Month Last Month Two Months Ago Three Months Ago

Strong Buy 7 6 6 6

Buy 7 7 7 7

Hold 10 10 11 9

Under perform 0 0 0 1

Sell 0 0 0 0

Source: Yahoo finance as of Jan.25, 2012, Data provided by Thomson/First call

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