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.
disclosure: Long WFMI