Whole Foods (WFM, Financial) has started the year on a positive note. Its top line grew 11.9%, while its earnings bumped up 10% for the first-quarter fiscal 2015. Its strategic move to lower its price and increase advertisement helped WFM to display this strong performance. Also, the launch of Values Matter brand campaign made significant contribution to this strong results for the quarter.
The Austin, Texas-based chain for the first-quarter reported revenue of $4.7 billion as compared to $4.2 billion in the same quarter a year ago. Also, it posted earnings of $0.46 per share as against $0.42 earnings per share last year in the firs-quarter 2014. The analysts were expecting earnings of $0.46 per share on the revenue of $4.67 billion for the first-quarter 2015.
Smart moves
Moreover, the company is busy with the refreshment of its existing stores. It plans to provide new look to its existing stores with changes to the decor, graphics, and other items. A few of these stores will undergo a complete remodeling. It remains on track to refresh 200 stores by the year end. It has already refreshed 40 stores so far this year. This refreshment should add value to its growing sales here after.
Apart from these strategic moves, the company is bringing in various innovations under its belt. It has recently launched its wine club that offers deliver of wine across the world. They also offer in-store wine bars. It has over 100 taprooms and wine bars amongst its stores, where people can enjoy a beer or glass of wine as part of their grocery shopping trip. This is undeniably a unique innovation and it should supplement to its growth going forward.
Looking ahead, Whole Food Market is expected to benefit from its strategic investment in new brand campaign, quality home delivery service, innovation and technology. WFM during the first-quarter launched its first-ever national brand campaign on television and print media. This brand campaign will certainly better communicate its food offering and drive its sales. Whole Food Market expects this brand campaign to create awareness for its brand for targeted audience.
It has already seen great contribution from this campaign to its results and expects this campaign to raise both value perception and competition level. Moreover, the company is now focusing on the quality delivery service. It runs fresh delivery services to more homes in the United States than its competitors. Its 15-market partnership with Instacart is gearing up the online home delivery sales.
Whole Food Market expects its sales to grow 9% for the fiscal year 2015. It forecasts low-to mid-single digit growth for its same-stores sales. Also, its earnings are expected to grow little above to the percentage of sales for the year.
Conclusion
The organic and natural-food grocery store chain looks an attractive investment avenue going forward. The analysts expect its earnings to grow at CAGR of 13.25% for the next five years. This signifies tremendous earnings growth for the stock in the long-run. Also, the stock offers good short term earnings growth. Its earnings are expected to grow 11.50% for 2015 and 2016.
Moreover, the stock is cheap. It has trailing P/E of 35.49 and forward P/E of 29.23. WFM has PEG ratio of 2.46 that continues to support its growth in the long-run. Its balance sheet carries total cash of $738.00 million and has total debt of just $64.00 million. It has operating cash flow of $1.14 billion and levered free cash flow of $420.00 million.
