Last Updated 07 Jul 2020

Whole Foods Market Finance Analysis

Category Market, Whole Food
Essay type Analysis
Words 664 (2 pages)

Whole Foods market generated $8. 0 billion in sales in fiscal 2009, an increase of 1. 0% over the previous years. Yet in fiscal 2009 same-store sales were down 4. 3% over the previous years. Operating income for Whole Foods was $284. 3 million in fiscal 2009, up to 20. 4% over the previous year. This improvement was largely due to stringent cost-containment measures that Whole Foods put into place in the face of the recession economy. The ratio comparison in table in the appendix suggests that Whole Foods Market inc. is in good shape financially, healthy company.

Whole Foods market is liquid company; it has high liquidity- strong cash flow to cover its debts and future projects. Our analysis of Whole Foods Market ratios indicates that the firm’s current financial position is outstanding compared with the industry norm. Thus, after examining 3 years and overall company’s history, the company is in the worse financial position in 2008 and 2009 than it was in previous years. This is caused by recent economic conditions and Whole Foods high demographic standards and target market.

But company managed its marketing strategies and financial operations to get back on track and its revenues picked up again in 2010. Overall, company managed well through recession and its prospects of growth are high. By examining Whole Foods market’s history, we can see significant, successful fast growth and superior financial results and management. Based on our findings, we can state with complete confidence that Whole Foods market is a superstar at managing its income statement, keeping its costs of goods and operating expenses extremely low relative to its sales (as indicated by its high operating profit margin).

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In terms of managing assets, the firm has much less inventory per dollar of sales than competing firms, which is good. Going Forward Overall, Whole Foods has relatively clean financial statements. The company received unqualified audit opinion and reward for superior finance performance from Ernst&Young. The company was growing at a strong rate while debts remain relatively low. Sales growth over past five years exceeded 15. 8%. Thus, sales declined from 2008 and were only one percent in 2009. Also, net profit margin significantly dropped from 3. 5 % the highest to 1. % in 2008 and now it went up to 1. 8 %.

But company generated positive cash flows from operating activities. By comparing Whole Foods market to its competitor Safeway Inc. , we can conclude that Whole Foods uses effective marketing strategies and financial management (flexible adjustment with current economic, political situation; adjusted differentiation market strategy to cost leadership strategy). Safeway had huge losses-around 8%, it had negative cash flows in 2009 and its debt ratio is very high-88%. Whole Foods return on assets for 2009 was 3. 8%, compare to Safeway (-6. 8%).

This shows that Whole Foods is able to charge higher prices for their products, which one is of the advantages of selling organic foods. According to L. Sandberg, consumers in the organic industry are not really looking for the best price, but instead the best quality. Research has shown that “the retail grocery market is typically considered somewhat resistant to economic downturns, thus, to some degree; consumers’ food budgets are price insensitive” (Lytel). We believe in the future Whole Foods market will pick up again and its sales and profits will rise at expected, forecasted target level.

Despite the fact that Whole Foods market did not reach its target sales till 2010, it is great that expensive grocer still had 1 % of sales growth, compare to much bigger Safeway, which had 8 % loses. Whole Foods Market Inc. , said quarterly profit more than doubled and raised its 2010 sales forecast, reflecting an improving economy that’s bolstering organic and specialty grocers. Large, traditional grocery chains, such as Kroger Co. and Safeway are struggling to emerge from recession and are locked in price-cutting battles for market share with Wal-Mart Stores Inc.. Little, if any sales growth is expected for major food retailers this year.

Whole Foods Market Finance Analysis essay

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