Whole Foods (WFMI) May Be One to Put in Your Cart for 2010 - WSJ
Whole Foods (NASDAQ: WFMI) shares are still down 66% from their all-time highs seen back in 2006, but they may be on the road to recovery, according to a recent Wall Street Journal article. Shares are currently trading up 1.94% to $27.93 this morning.
Comps grew around September 2009, as well as traffic increasing for the same period.
One reason to take a look at WFMI is their commitment to controlling expansion to a more manageable level. Square footage used to increase by 14% annually, but has now been scaled-back to a much more reasonable 7%.
Additionally, many stores will be around 8.5 years old in 2012, and mature stores tend to be more profitable as start-up costs ebb from balance sheets.
Shares of WFMI are trading at about 23x FY10 EPS estimates currently, slightly surpassing most retailers. This might put some investors on alert, but WSJ says that the valuation represents large expenses still hanging around from the company's building boom. Rising revenues from existing stores should outweigh the costs over time.
WFMI has an enterprise value of 6.3x EPS pre-interest, compared to Starbucks (NASDAQ: SBUX) level of 8.2x, suggesting that the luxury grocer may be a worthwhile addition to your portfolio.
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