Change in Macro Environment Makes Whole Foods Market, Inc. (WFM) Interesting
Whole Foods Market, Inc. (NASDAQ:WFM) has attracted the investors’ attention after its earnings topped expectations in the fourth quarter by 15%. That was the first beat in, at least, last four quarters. Also, the shift in macro environments makes the stock more interesting as the millennials would become the biggest power as far spending is concerned in the United States. The company also appears to have strategized in such a way to win over the millennials.
Aside from these, the organic food retailer is also content with the slower growth path when it comes to chickens as it was eager to source it from like-minded farmers only.
Shift In Buying Power
Whole Foods Market, Inc. (NASDAQ:WFM) does see that there is a shift in buying power as the generation passes. The company appears to be well-positioned to take advantage of the millennial generation’s spending power. The chain of retailer also established its connections with the generation next and also with baby boomers. As a result, there is a section of investors, who believe that the consumer habits might change due to the next generation. Also, Millennials would be the largest spenders as they spread across the nation. That would drive for future growth on key demographic regions.
The reports suggested that in the next year, Millennials would assume greater buying power thus overtaking the other generations. Whole Foods Market, Inc. (NASDAQ:WFM) could see the difference by the turn of the next year. The current data suggested that the company is spread across in the United States, the United Kingdom, and Canada with its 362 stores. Its 365, as well as, the 365 Organic Everday Day Value brands represented 50% of its brand items. Its product ranges between grocery, seafood, bakery, and prepared foods and catering, nutritional supplements, pet products, body care, beer, tea, wine, and other household products. By this, the company wants to ensure that its customers get a fresh shopping experience to suit their budget or lifestyle. Interestingly, Millennials give enough assessment to experience in the ownership of products.
Content With Slower Growth In Chicken
Whole Foods Market, Inc. (NASDAQ:WFM) took a calculated decision in respect of chickens. The company is ready to forego the rapid growth to retain the customer base by insisting on slow-growth birds from the farmers. The retailer reiterated its commitment to buy chicken only from farmers who raise slow-growth birds. It also established some objectives in this respect. For instance, by 2024, the company would focus on selling chickens, which take more time to mature. The organic food retailer has already taken a decision to sell only eggs, which come from cage-free birds. These steps were well-intended to protect the consumer’s interests, who have become more health-conscious.
It was not just Whole Foods Market, Inc. (NASDAQ:WFM) but other retailers have also come across that chickens with about five pounds weight could be raised in 35 days with the breeds selection to grow rapidly. According to data, the market is flooded with 98% of such chickens. However, such breeds have a number of issues like walking or flying or perching. Gap Inc (NYSE:GPS) follows a five-stage rating system, which recognized food producers for the animal welfare record. As a result, it was seeking 100% switch to slow-growth chickens. Whole Foods follow the footsteps of Gap in chickens.
Engagement Of Community
The two initiatives, slower growth of chickens and 365 program, meant that the focus was on engaging the community. Whole Foods Market, Inc. (NASDAQ:WFM) is only trying to emulate Lululemon Athletica inc. (NASDAQ:LULU) in engaging the community to identify itself with the consumers. That should enable it to create constructive relationships with its customers so that it could last for several years to come.
As far as the financial metrics, Whole Foods Market, Inc. (NASDAQ:WFM) performs better than the industry in six of the ten metrics. For instance, its price to book represented only 3.2 times compared to the industry average of 3.7 times. Similarly, its three-year average revenue growth is 9.6% whereas the industry could witness only 3.2%. Its net margin for the trailing twelve-month period was 3.4%, which is better than the industry average of 1.8%. The most negative factor is that its net income could grow only 4.8% in the three-year average period whereas the industry’s growth was 78.1%.
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