Whole Foods Market, Inc. (WFMI) has rebounded nicely from its November low as the company continues to pursue price and promotional initiatives to attract value conscious consumers.

Company Description

Whole Foods Market, Inc. together with its subsidiaries, owns and operates natural and organic supermarkets primarily in the United States. The company was founded in 1978 and has a market cap of $3.79 billion.

Whole Food’s took a turn for the worse when the economy started tanking a few years back. The company’s expensive, high-end products proved to be incompatible with the rapidly deteriorating consumer environment.

But alas, management recognized the company’s weaknesses, and has acted to counter the trend with more moderately priced items and an ongoing emphasis on customer service. The strategic shift showed up in the company’s second-quarter results, reported on August 4.

Second-Quarter Results

Sales were up 2% from last year to $1.9 billion, the company’s first revenue gain in several quarters. Earnings came in at 24 cents per share, 5 cents ahead of the Zacks Consensus Estimate. The company has beat in each of the last four quarters by an average of 5 cents, or 31 cents.

Earnings Details

Whole Foods noted that its results were helped by a number of factors, including lower pricing, promotions to attract value driven consumers and lower commodity costs. The company also said its cost control measures are paying off, helping it to expand its operational margin.

Estimates Up

With a new sense of purpose and direction driving the company, analysts have increased their earnings targets. The current-year estimate is up 10 cents in the last month to 86 cents per share. The next-year estimate is pegged at $1.05, a 21% growth projection.


Due to the optimism, this stock does not come cheap. Based on the current estimate, shares carry a P/E multiple of 31X, a steep premium to the overall market.

The Chart

Shares of WFMI have been rallying since late November, bottoming out just above $6 before recently topping off above $29. Take a look at the big rally below.


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