Whole Foods Is Not Alone Anymore
While that reputation hasn't exactly changed -- and there is ample evidence that this new healthy-eating lifestyle among Americans is here to stay -- Whole Foods no longer corners the "health market." I fear this fact is not yet reflected in today's share price.
I'm not discounting the fact that Whole Foods is a well-run company, one that operates at a high rate of efficiency. But at the same time I'm not willing to ignore that chains such as The Fresh Market
If that was not enough, when you couple these new arrivals with the fact that "regular" retailers including Wal-Mart
This doesn't mean the company won't still be successful. Without a crystal ball there is really no way for me to say that when that time comes that Whole Foods' management would not have found new growth opportunities. My issue, as I've said, is today the stock -- which trades at a price-to-earnings ratio of close to 40 -- is expensive.
While management has certainly fed the Street's insatiable appetite for growth, there will be a point when, say, Wal-Mart decides it wants to apply more pressure on Whole Foods' margins. Let's assume that I'm slightly overestimating Wal-Mart's capabilities -- there's still Target, which has just as good an infrastructure and resources to squeeze out Whole Foods with competitive market/promotions.