So most people don’t get too excited about the grocery store. Well, I happen to live in Austin, TX where the world headquarters of Whole Foods is located so I’m a little biased. However, every time I’m in one of their stores, it’s packed and shoppers love it. I can honestly say it’s the only grocery store I can go to and enjoy the experience. They have a plethora of hot foods and an enormous salad bar available with lots of farm fresh and organic produce. They also have a 50-tap Oyster Bar. Yes, they keep 50 beers on tap that are constantly rotating as well as some wines on tap. I’ve never had such good customer service at a grocery store than I’ve had there. I’ve eaten dinner or lunch there many times. The store I’m talking about isn’t even their main store. I know it may not be typical for all Whole Foods but I’ve also been to the regular stores and enjoy the experience.
I’ve wanted to own Whole Foods (WFM) but its yield was always a little low for my liking and then it was also in the grocery space which isn’t my favorite. Well, the company reported earnings yesterday and only missed by $0.007 , yes that’s 7/10 of a cent. The stock dropped approximated 12% today and I was able to pick up shares for a YOC of about 1.5%. Be greedy when others are fearful right?
Since 2009, they’ve had a good record of increasing their dividend and still have a fairly low payout ratio. Everyone is worried about all the competition from the other grocery chains and farmers markets. It’s true that it’s much easier to find organics than it used to be. There’s also a lot more demand since more people are eating organics. That’s not the only appeal of the company though; it’s a true customer experience in the store. If you haven’t been to one, I’d encourage you to check it out. Some of their products are a little pricey so I wouldn’t encourage purchasing everything on your list here. I do love their produce and believe their prices are competitive and you are truly paying for quality. Quality food is a luxury I don’t mind splurging on a little bit. I love to eat fish and I’m constantly checking out the produce at the store since it’s close by.
Morningstar as well as S&P Capital IQ both give them 3 stars. S&P Capital IQ has a 12-month price target of $47 and a 3-year CAGR EPS growth rate of 12%.
WFM is a 13-billion dollar company and I believe they have plenty of room to grow.
I purchased 100 shares for $35.74/share. This is a nice entry position and I’ll be watching the company on any further weakness. These 100 shares will add $52/year in annual income.