Company Information Whole Foods Market is categorized in the grocery store industry.

This grocery store was founded in 1978 and is headquartered in Austin, Texas. There are several core values that they believe in as a company. These core values include; selling the highest quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth through profits and growth, caring about our communities and our environment and creating ongoing winwin partnerships with our suppliers. Their central focus is the ownership and operation of natural and organic food supermarkets. The business offers products that include seafood, meat and poultry, bakery items, prepared foods and catering, coffee and tea, nutritional supplements and vitamins. Along with that they also provide specialty products like beer, wine, cheese, body-care products and educational books, floral, pet and household products. By September of 2009, the company was operating 284 stores and of those stores 273 were located within the United States. Although an intraday performance summary showed that the grocery store industry had decreased about .64%, the Whole Foods Market managed to stay green and increase about .28%. Although Whole Foods started as an all natural food store and has continued to stay within that scope no matter how the industry has fluctuated over the years. Whole Foods is without a doubt a defensive company. They sell what some consumer may see as premium food items but due to the fact that they are food products they will still be a necessity every day of the year and even during downturns in the economy. The feeling about Whole Foods as a company is that it is in great shape to move forward and take

advantage of the recovering economy. Now is the time that people will start to spend more money on better quality necessity items which will bring consumers into the Whole Foods stores and help the company to prosper.

Industry Analysis The Super market and Grocery store industry is in the mature stage of the industry life cycle. This industry experienced an increase in revenue in 2007 and 2008. In 2009 at the height of the recession the industry experienced a small decrease in revenue. The industry is expected to experience a decrease in overall revenue in the next three years due to increasing transportation and utilities expenses. The Supermarket and grocery store industry has all the characteristics of being a highly competitive industry. It has a low level of concentration meaning that there are many firms each with a small share of the market. The industry is saturated with many small firms offering the same or very similar products. During the recession many firms such as Kroger took advantage of the situation and increased their market share by buying out competitors. Many small businesses with less than 5 employees have been fading out in the past five years. This trend is expected to continue over the next three years. The Kroger Co. has the biggest share of the market with 15.5%, Safeway Inc. has 8% and Supervalu Inc. has 6.5%. These are the three biggest competitors in the industry but the other 70% is made up of smaller, niche companies. Whole Foods has a 1.5% market share of the industry. Their share of the market is expected to grow in the next five years because of the growth of their niche product line of organic and natural foods.

The retail food industry is affected by external competition from warehouses such as Costco and Sams Club. They also compete with supercenters like Walmart and Kmart. These companies do not specialize in the sale of food but they use economies of scale to provide cheaper products. The level of regulation in the retail food industry is light and the trend is steady. There are not many regulations for companies to deal with. There is the Sherman Antitrust Act, banning companies from cutting prices drastically intentionally driving out competitors. The industry is also lightly regulated by the Food and Drug Administration and the US Department of Agriculture. Recent Stock Performance (January 2009 October 2010) In 2009, Whole Foods Market Inc. had a substantial increase in earnings for those who chose to invest in the company. On December 31, 2008, Whole Foods Market Inc. stock price closed at $9.44, and by January 4, 2010 the stock price had risen to $27.85. In short, Whole
Whole Foods Market vs. SPY 500, Retail Foods Industry, & Kroger
December 31, 2008 - January 4, 2010 - % of Growth

Foods Market Inc. had a 195

WFMI SPY 500 RFI

300 250 200

Percentage

percent rate of return over 2009. While this statistic is impressive, Whole Foods as

150 100

KR 50 0 -50

of August 2008 suspended their quarterly dividends to their shareholders. Up until this date Whole Foods had given quarterly dividends since January 2004. However, the company just recently announced that they will be resuming their quarterly dividends as of January 2011. This bodes well for future investors assuming Whole Foods will still increase their return on investments. The overall market improved dramatically throughout 2009 having a rate of return of 170 percent respectively, and it is obvious Whole Foods stock was profitable as shown by its rate of return. When compared to the market of stocks in Thomson Baseline, Whole Foods Market Inc. stock had a relative strength of 91 meaning Whole Foods out performed all but 9 percent of the stock market in 2009. In 2009, the S&P 500 also improved their rate of return by 26 percent and had a relative strength of 44 when compared to the market. This indicates that the S&P improved significantly, but did not have quite the success as Whole Foods during the year. When comparing these two stocks one has to take into account that the S&P 500 factors in more than one stock just as needs to be done when comparing to the entire market. If one company in the S&P has a dramatic gain or loss it will affect the entire stock causing it to rise and fall in price as such. Thus, to know how Whole Foods performed the company needs to be compared the industry it is in and even to a specific competitor also in the market. As a whole, retail food industry did not perform well. In 2009, the retail food industry had a rate of return of negative 8 percent. When Whole Foods is compared to the industry it is simple, there is no comparison. Whole Foods had a fantastic year in the market as the industry suffered.

The main competitor in the industry to Whole Foods is Kroger. In 2009, Kroger stock did even worse than the industry. The rate of return for Kroger was negative 22 percent. When compared to Whole Foods this is staggering considering Whole Foods rate of return of 195 percent. Kroger while still a larger company in the market suffered in the current state of the economy. Their relative strength was 14 meaning they did not even outperform one-fifth of the market while Whole Foods outperformed over 90 percent. All these numbers have shown that in 2009 Whole Foods stock outperformed the market, S&P 500, retail food industry, and a close competitor. Whole Foods Market Inc. stock did not experience many, if any, problems in 2009. Their stock grew substantially for most of the year. However, there is one
Percentage

U.S. Unemployment Rates Jan 2009 - Jan 2010

11 10 9 8 7 6 5
Nov Jan Jun Mar Feb Aug Sep May Oct Dec Jan

comparison that can be made. For the most part Whole Foods stock price increased and decreased as did the national

Unemployment Rate

4
Apr Jul

unemployment rate. From January through mid February Whole Foods stock held somewhat steady around $9.50. As unemployment rate grew significantly in the upcoming months so did Whole Foods stock, increasing in stock price from $9.29 to $22.44 in less than 3 months. The unemployment rate dropped from June to July and so did the price for Whole Foods stock. On June 15, Whole Foods stock price began to drop from its $20.44 price.

It dropped to $17.18 on July 7, its lowest point since such a substantial increase. Just as unemployment went up again in the following months, Whole Foods price reached its highest point. In October, the month of highest unemployment, Whole Foods stock reached its high point of the year of $34.19. Then again unemployment rates decreased and so did Whole Foods stock. When unemployment decreased the stock went from $32.06 to $27.10 in one day. From that point Whole Foods stock fluctuated slightly but held at about $27 per share from the rest of the year. As a side note, and shown in the graph, unemployment rates held steady. In 2010, Whole Foods Inc. stock has continued to grow dramatically. Since beginning at $18.19 on January 4, the stock today is at $45.64. This is over 250% increase in stock price. This increase is partially due to the fact that Whole Foods premium food products are beginning to turn into more revenues with the economy making improvements and the fact they are also a defensive company. People are beginning to spend their money on not just items of necessity but also items they wouldnt ordinarily buy in the down economy. This is an advantage for the retail food industry in general. Expect Whole Foods Stock to continue to grow over the next few months barring a disaster in the national economy. As the economy continues to improve Whole Foods stock will as well. According to Baseline, the current beta for Whole Foods stock is 1.14 indicating their stock flows with the market. In short, as long as the market continues to improve Whole Foods will as well creating even larger profits for investors. But if the market begins to fall watch this stock very closely because chances are its price will fall as well.

At this moment, Whole Foods stock is bullish indicating that most believe its stock will rise in the near future as the economy has been improving. Whole Foods stock can be considered safe within the market and their particular industry. Their current leverage of 1.8 when compared to the rest of their industry has much less risk than that of Kroger (4.3), Supervalu (6.0), and Safeway (2.7) making Whole Foods a worthwhile investment.