Whole Foods Markets (WFM)

[DewDiligence]

Thanks for weighing in; let me reply to some of your points.

The US govt barely allowed WFM to buy [OATS] a few years back. They'd freak over [KR] merger for sure.

Not necessarily. Back when WFM acquired OATS (which seems like half a lifetime ago), the antitrust regulators defined the businesses in question as natural foods grocers, and hence the merged WFM-OATS had a substantial market share.

Today, natural foods have gone mainstream, so antitrust regulators will presumably look at market share consolidation in the general grocery business. When considered in that light, a KR-WFM combination would not have that much more market share than KR alone.

I love WFM, but where are the differentiators anymore?

There are still many items WFM carries that aren’t available anywhere else. Moreover, the WFM shopping experience and the level of service continue to stand out from competing stores, IMO.

Whole Foods is excellent with retail and merchandizing standards. But grocers have copied all of their moves.

Despite the attempts at imitation, WFM still has the highest sales per square foot in the industry.

Trader Joe's goes wherever they open and erodes their prep food and bulk opportunities.

Trader Joe’s is a fine store, but they’re not WFM by any stretch of the imagination. TJ carries mostly private-label products and their selection is hit-and-miss—i.e. you can’t rely on them to have an item you want in stock on any given day.

When they announced the 365 chain stores I didn't like it. To me it marked an act of desperation from an old tired management team. The innovator was now the copycat. Let's do what Aldi and Trader Joe's is doing.

’365’ stores are nothing like TJ. ‘365’ emphasizes (high-margin) prepared foods, which TJ doesn’t do at all. ‘365’ has a consistent selection you can rely on, and only about 30% of the ‘365’ merchandise is private label (vs about 75% at TJ).

I am really worried about union penetration into the stores with challenged morale after the layoffs and for some questionable job security.

That’s a valid concern, but there’s been no hint of actual movement in that direction, as far as I know.

Opening new stores are outrageously expensive, as well as operating their regional headquarters.

I’m not sure what you’re driving at. As long as WFM can grow the Whole Foods flagship store base from internally generated cash flow, they should continue to do so. (‘365’ store openings are inexpensive since they are the ‘365’ stores are carbon copies of one another.)

I really hope WFM breaks out.

Are you referring to the share price? If so, all you need is some patience, IMO. As long as WFM continues growing the store base from internally generated cash flow, it’s almost mathematically assured that earnings and EPS will rise in the next few years. If that happens, it’s hard to see how the share price doesn’t rise too.