borisb's  Instablog

 The leading supermarket chain of the natural foods movement appears  back on its feet.   The company seems to be getting it right with all stake holders.    1. Consumers are benifiting from promotions as WFMI aggressively  passes on price savings of useful whole foods in high volume.  The WFMI took this out of the play book of  Trader Joes.  Last Fall they did fabulous with 99 cent a pound organic apples promotion.   Also WFMI company is   generous with lower  pricing on its  ever expand SKU  count of  365  Label  house brand products now about 22% of sales.  This week  I bought bigger 1 liter  365 italian spring water bottles for $1.25 each , much  less then  Costco bulk  or  Publix   retail.  Some high grade poultry cuts were  $1.50 and $1.99 a pound  at the meat counter.  Same store sales have stablized and improved since March 2009.  Same store sales have several things going for them, for onw  the Whole Deal bimonthly 15 page+  company marketing flier is like a basic training manual for customers.   2. Shareholders get rewarded as management has pledge to rein in spending at the stores and the expansion program.   Free Cash flow is blossoming to $4 a share  leading to a  20% free cash flow yield for 2009, even though the company has forward growth  opportunites  with just 2% of  total  US  retail grocery store sales.  I believe they will get another 1% to 2%  of the  total supermarket  industry sales eventually moving towards 3%. This assuming the national accepted retail  footprint favors  WFMI  store over the smaller and sometimes nibbler  German owned  Trader Joes.  The   WFMI  company has halved annual square footage growth to 9% annual.  This is ideal. The new stores in 2009 are performing much better that the 2008 stores were at this time.  Probably because last years zealous store opening count had many low volume  duds.   Regardless,  todays new stores are prime spots and further improve the dominance of the  franchise.  New stores are being opened with stricter financial declipline and often the square footage  trend for a new store is leaning down towards 40,000 square foot as opposed to the prior trend in 2007 and 2008  of  bloating up towards 60,000 square feet.   I agree this is the right path for the prototype store of the future.  I  suspect a  slick  40,000-ish  square foot  WFMI store is better then a  60,000 square foot elephant and a  10,000 share foot mouse by Trader Joe's.    3. US Govenment is satisfied with its justice efforts on  the shady  merger  aspects  of  wfmi-oats and is backing off.  Also the time table for the OATS stores to blossom is nearing.  4. Employees  of WFMI ought to get support from the fact the company has been vote one of the best 100 companies to work for several years in a row.  WFMI has about 10 million square feet with its 280 stores.  This might move to 30 million square feet over the long haul and near  1,000 stores.  But the business plan needs to evolve more before mass market penetration becomes easier.  So far  WFMI has made some big progress in key areas during  the past 12 months. These progress points might be just the trick to take more steps towards 1,000 stores.    5.   The short interest numbers recently were  22,000,000   or about 16% of all  140 million + shares outstanding.   IF the shorts think that the WFMI has lost touch with its customers and the high prices  issue during the recession,   shorts better rethink their stradegy.   Offical 3rd party monthly  measures on this issue have steadily  improved with customers for about 10 months according to last confrence call.