The Rising Influence of Rising Affluence

[Timothy Smith]

$WFM - Whole Foods will be swimming against the current to sustain current earnings.

Not only must price investments be significant enough to reverse traffic trends and increase basket, they also require meaningful cost reductions to offset declining gross margin.

With the growth of lower priced organic and upscale groceries at Trader Joe's, Kroger, and Costco (among others), the road ahead still looks challenging and complex.

Further, if customer perception does not change, more price investments may be required to reverse declining traffic trends.

That suggests Whole Foods could be losing its premium franchise and margins will likely be lower in 1-2 years time.