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Back in the 1980s my grocery store mentor taught me the best way to know how many checkout lanes to open was to count the customers with shopping carts and divide by three. I spent the better part of a decade patrolling grocery aisles counting carts before leaving the industry in the 1990s. But even today I find myself counting carts every time I walk the aisles.

Instead of trying to figure out if another lane should be opened, I'm gauging foot traffic for revenue and sales trends instead.

Crowded stores are always nice. But, an even better sign is customers pushing carts. Especially if those carts are being filled with high margin specialty and organic products like those sold by Whole Foods Markets (NASDAQ:WFM).

The company's sales figures reflect excitement uncommon in the industry.

Comparable store sales increased an impressive 8.2% last quarter, despite a 62 bps headwind from the shifting of Easter. The main reason cited by the company for its success was rising transaction counts. In short, more people have been shopping in their stores.

Operating margins were 6.9% in the quarter, which prompted the company to boost its FY12 guidance by $0.05 to $0.07. Overall, sales climbed 14% to $2.7 billion as earnings per share rose 27% to $0.63. Gross profit margin inched up 62 basis points to 36%, as higher sales were leveraged against fixed direct store expenses. For comparison, gross profit margin averaged 34.6% from FY07-FY11.

For comparison, grocery Goliath Safeway (NYSE:SWY) reported same store sales growth of only 0.8% as gross margin fell 73 bps from last year. Kroger's (NYSE:KR) 4.2% same store growth rate may have been better than Safeway, but still lagged Whole Foods considerably. Kroger's gross margin also fell 53 bps from a year ago.

Whole Foods is enjoying the benefits of maturing markets.

As new stores mature, they drop more money to the bottom line. At Whole Foods, stores between 8 and 11 years old are generating an average return on invested capital ("ROIC") of 91%. This suggests considerable leverage for younger stores as they age, given 125 of its 329 locations are less than 8 years old and generate less than 52% ROIC.

Overall, average weekly sales by store are running $696k, or $969 per square foot. New stores open less than six months are running about $575k, or $786 per square foot. As these younger stores establish their footprint, look for them to more meaningfully contribute to revenue and profit growth.

Whole Foods build-it-and-they-will-come approach is paying off.

In uncertain economic times it's likely a relief to Whole Foods C-suite to see consumers shrugging off anemic job growth. Much like Mr. Kinsella's gamble to plow under his corn to build a ball field paid off, Whole Foods' new stores are working like a dream too.

The company opened 9 new stores last quarter and plans to open another 7 this quarter, bringing new stores opened this fiscal year to 25. In FY13, the company plans to build another 28-32 stores. And, in FY14, it plans to open 33-38 stores. Over time, the company believes it could operate as many as 1,000 total stores.

Whole Foods is also expanding its position in Canada, where it has 7 stores with another 7 more under development. The company estimates sales from Canada could top $1 billion in ten years. And, it has opened 6 stores in the U.K., with another 3 in development too.

Store growth offers earnings upside next year.

At quarter's end, WFM was sitting on cash and investments of $1.5 billion, up $792 million from last year, in spite of expansion and remodeling expenses. The healthy balance sheet suggests plenty of room for its future growth and potential for shareholder friendly dividend hikes.

The company expects comp store sales growth of 6.5%-8.5% in FY13 will produce earnings of $2.83-2.87 per share, up 16-17%. This sparked analysts to increase their own projections to $2.90 from $2.83 60 days ago. Given Whole Foods has beat the Street in each of the last four quarters, they may not be done revising estimates higher.

All this suggests the stock should continue its winning ways into fall. Shares have finished October higher than they've started August in 4 of the past 5 and 8 of the past 10 years, generating average returns of 5.62% and 6.66%, respectively.

Admittedly, the stock isn't cheap. No one will confuse Whole Foods with a value play. Shares are trading 33x 2013 estimates. So, while value investors will shun shares, growth investors interested in companies kicking off solid revenue, earnings and cash flow growth should pay attention. At a minimum, you might want to start counting the carts next time you walk into the store.

Source: Whole Foods' Gold Plated Grocery Carts