Rob Black's Retail Stock Report

Includes: AMZN, AVP
by: Rob Black
Whole Food’s (WFMI) premium multiple valuation remains untethered from its realistic growth profile. Despite compelling industry and company fundamentals that have the potential to drive accelerating earnings growth, the simple fact remains that unit opening limitations, high expense structure of the operating model, and increasing competitive pressures all serve to limit the realistic rate of earnings growth for Whole Foods. Analysts continue to struggle to see a scenario where Whole Foods can deliver earnings growth north of 20% for any sustained period. Moreover, earnings growth is decelerating in 2007 and 2008 as Whole Foods absorbs rising pre-opening costs and option expense. Investors will continue to erode the valuation premium until it is more adequately aligned with its growth prospects. (NASDAQ:AMZN)
announced that second quarter 2006 jewelry and watches sales increased more than 100% Year over Year.

Banc of America believes Avon's (NYSE:AVP) weakness appears overdone on a near-term basis, saying yesterday's quarter was "bad, but not that bad".