Stock at Whole Foods Market (WFM) have drifted towards the $30 mark. WFM has a soft spot in my heart. When I was living in the USA, I bought all my meat from WFM and it tasted so good! Moreover, all my classmates thought I was a spendthrift which made me want to go there more. It was like the Apple luxury good effect. However, I went there because I personally do not want antibiotics and hormones in my meat, and also because the extra checks in organic food means there is better food safety.
This past year, WFM has started coming down in price. Organic food has become more mainstream and the traditional grocers such as Walmart or Target are offering it. Even in Singapore, the “layman” grocer NTUC offers organic vegetables. This has caused analysts to fear that WFM’s margins will deteriorate.
Peridot Capital has argued their thesis in several posts which I have linked to before. One part of their argument that I find unique is that same store sales have fallen because WFM has opened so many new stores that they are cannibalizing each other. That makes intuitive sense but same store sales at their new stores are increasing rapidly that I believe WFM is expanding the pie as well.