Whole-Foods Market, Inc. - 2009 Case Notes Prepared by: Dr. Merno sh !

anton Case " thors: #a$es %. &arb'n and Patr'c'a & $phrey

A.

Case Abstract

Whole-Foods Market, Inc. ())).)hole*oods.co$+ 's a co$prehens',e b s'ness pol'cy and strate-'c $ana-e$ent case that 'ncl des the co$pany.s F'scal year-end /epte$ber, 2000 *'nanc'al state$ents, co$pet'tor 'n*or$at'on and $ore. 1he case t'$e sett'n- 's the year 2009. / **'c'ent 'nternal and e2ternal data are pro,'ded to enable st dents to e,al ate c rrent strate-'es and reco$$end a three-year strate-'c plan *or the co$pany. &ead3 artered 'n " st'n, 1e2as, Whole-Foods Market, Inc. 's traded on the Ne) 4ork /tock 52chan-e nder t'cker sy$bol WFMI.

B.

Vision Statement ("ct al+

6 r ,'s'on 's all abo t health and or-an'c prod cts that reaches *ar beyond 7 st *ood reta'l'n-.

C.

Mission Statement ("ct al+

6 r Co$pany $'ss'on 's to pro$ote the ,'tal'ty and )ell-be'n- o* all 'nd','d als by s pply'n- the h'-hest 3 al'ty, $ost )holeso$e *oods a,a'lable (8, 2, 0+. /'nce the p r'ty o* o r *ood and the health o* o r bod'es are d'rectly related to the p r'ty and health o* o r en,'ron$ent, o r core $'ss'on 's de,oted to the pro$ot'on o* or-an'cally -ro)n *oods, *ood sa*ety concerns, and the s sta'nab'l'ty o* o r ent're ecosyste$ (9, :+. 1hro -h o r -ro)th, )e ha,e had a s'-n'*'cant and pos't',e '$pact on the nat ral and or-an'c *oods $o,e$ent thro -ho t the ;n'ted /tates, help'n- lead the 'nd stry to nat'on)'de acceptance o,er the last 20 years (<, =+. 8. 2. <. >. =. 9. :. 0. 9. C sto$er Prod cts or ser,'ces Markets 1echnolo-y Concern *or s r,',al, pro*'tab'l'ty, -ro)th Ph'losophy /el*-concept Concern *or p bl'c '$a-e Concern *or e$ployees

Mission Statement (Proposed+ 6 r Co$pany $'ss'on 's to pro$ote the ,'tal'ty and )ell-be'n- o* all 'nd','d als by s pply'n- the h'-hest 3 al'ty, $ost )holeso$e *oods a,a'lable (8, 2, 0+. /'nce the p r'ty o* o r *ood and the health o* o r bod'es are d'rectly related to the p r'ty and health o* o r en,'ron$ent, o r core $'ss'on 's de,oted to the pro$ot'on o* or-an'cally -ro)n *oods, *ood sa*ety concerns, and the s sta'nab'l'ty o* o r ent're ecosyste$ (9, :+. 1hro -h o r -ro)th, )e ha,e had a s'-n'*'cant and pos't',e '$pact on the nat ral and or-an'c *oods
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$o,e$ent thro -ho t the ;n'ted /tates, help'n- lead the 'nd stry to nat'on)'de acceptance o,er the last 20 years (<, =+. 6 r ded'cated and kno)led-eable e$ployees are ea-er to ass'st o r c sto$ers, )hether 'n o r stores or thro -h o r h'-hly 'nteract',e co$pany )eb s'te (>, 9+.

D.

External Audit

CPM Competitive Profile Matrix

W ole !oods Mar"et
Critical Success !actors Wei$ t &atin $ Wei$ te d Score

#ro$er
&atin $ Wei$ te d Score

Wal%Mart
&atin $ Wei$ ted Score

"d,ert's'n/er,'ce @ Prod ct A al'ty Pr'ce Co$pet't',eness Mana-e$ent F'nanc'al Pos't'on C sto$er %oyalty Prod ct %'nes Market /hare C sto$er /er,'ce 1echnolo-y 5$ployees Blobal 52pans'on 'otal

0.80 0.80 0.80 0.0> 0.80 0.80 0.80 0.0: 0.09 0.00 0.0: 0.0= (.))

8 > 8 2 2 > 2 8 > 8 < 8

0.80 0.>0 0.80 0.00 0.20 0.>0 0.20 0.0: 0.<9 0.00 0.28 0.0= *.*+

2 2 2 8 < 2 8 2 < 2 2 2

0.20 0.20 0.20 0.0> 0.<0 0.20 0.80 0.8> 0.2: 0.89 0.8> 0.80 *.)+

> < > < > < < > 2 > 8 >

0.>0 0.<0 0.>0 0.82 0.>0 0.<0 0.<0 0.20 0.80 0.<2 0.0: 0.20 ,.*-

.pportunities
8. Brocery stores are ranked a$on- the lar-est 'nd stry 'n the ;n'ted /tates 2. 6*ten re3 'res lo) )a-es and part t'$e e$ployees <. /tores o**er'n- add't'onal ser,'ces s ch as ready-to-eat $eals, salad bars, co**ee shops >. 52pected Increase 'n reta'l sales a$on- lo) pr'ced stores =. Pr',ate %abel brand 's -ro)'n- rap'dly as a s bst't te to pre$' $ brands 9. &'-h entry barr'ers *or a co$pany to open too $any stores 3 'ckly :. Cons $ers are $o,'n- to a $ore healthy eat'n- hab'ts 0. Weak econo$y ca ses cons $ers to c t back 'n eat'n- o t and spend'n- $ore $oney by shopp'n- to cook at ho$e

' reats
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8. Not ,ery pro*'table per 'te$ sold, o*ten only a penny on e,ery dollar sold 2. Weak econo$'c cond't'ons ca s'n- cons $ers to c t back, $any b y'n- -ener'c brands <. ;ne$ploy$ent 's 'ncreas'n- ca s'n- c tback 'n b y'n- brand-na$e prod cts >. Increase 'n * el cost co ld '$pact the p rchas'n- po)er o* the cons $ers =. Increase 'n * el cost co ld ca se s ppl'ers to ra'se the'r pr'ces 9. Con,en'ence stores are o**er'n- $ore brands and 'te$s *or '$p lse shoppers :. Co$pet't'on 's stron- a$on- -rocery store cha'ns

External !actor Evaluation /E!E0 Matrix

#e1 External !actors

.pportunities 8. Brocery stores are ranked a$on- the lar-est 'nd stry 'n the

Wei$ t

&atin$

Wei$ ted Score

0.0: 0.00

8 < < 2 2 8 > <

0.0: 0.2> 0.80 0.89 0.80 0.0= 0.<9 0.2:

;n'ted /tates
2. 6*ten re3 'res lo) )a-es and part t'$e e$ployees <. /tores o**er'n- add't'onal ser,'ces s ch as ready-to-eat $eals, 0.09 0.00 >. 52pected Increase 'n reta'l sales a$on- lo) pr'ced stores =. Pr',ate %abel brand 's -ro)'n- rap'dly as a s bst't te to 0.09 0.0= 0.09 :. Cons $ers are $o,'n- to a $ore healthy eat'n- hab'ts 0. Weak econo$y ca ses cons $ers to c t back 'n eat'n- o t 0.09

salad bars, co**ee shops

pre$' $ brands
9. &'-h entry barr'ers *or a co$pany to open too $any stores

3 'ckly

and spend'n- $ore $oney by shopp'n- to cook at ho$e

' reats 8. Not ,ery pro*'table per 'te$ sold, o*ten only a penny on e,ery 0.0: 0.0: 0.09 0.0= 0.09 =. Increase 'n * el cost co ld ca se s ppl'ers to ra'se the'r pr'ces 2 < 2 2 2 0.8> 0.28 0.82 0.8 0.82

dollar sold
2. Weak econo$'c cond't'ons ca s'n- cons $ers to c t back,

$any b y'n- -ener'c brands

<. ;ne$ploy$ent 's 'ncreas'n- ca s'n- c tback 'n b y'n- brand-

na$e prod cts

>. Increase 'n * el cost co ld '$pact the p rchas'n- po)er o* the

cons $ers

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9. Con,en'ence stores are o**er'n- $ore brands and 'te$s *or

0.0> 0.0>

8 2

0.0> 0.00 *.,*

'$p lse shoppers

:. Co$pet't'on 's stron- a$on- -rocery store cha'ns

'otal

(.))

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Positionin$ Map
N $ber o* /tores (&'-h+

WalMart Dro-er

Narro) Pr'ce Co$pet't',e

W'de Pr'ce Co$pet't',e

Whole Food Market

N $ber o* /tores (%o)+

E.

2nternal Audit
Stren$t s 8. Cert'*'ed to sell or-an'c *ood 'n e,ery depart$ent 2. 52pected to ha,e C82 b'll'on 'n sales by 2080 <. Desp'te *lat sales 'n the last t)o years, the co$pany has had stroncontrol 'n keep'n- 'ts e2penses lo) >. /o$e stores )ere b 'lt 'n lo)-'nco$e areas, $ak'n- the$ to be $ore co$pet't',e )'th other establ'shed and lo)er cost co$pet'tors =. 1he co$pany has '$ple$ented a str'n-ent cost control and red ct'on 'n cap'tal e2pend't re 9. Ba'ned add't'onal $arket share )hen ac3 'red W'ld 6ats Market Inc., one o* the'r stron-est co$pet'tor 'n 200: :. &ea,'ly 'n,ol,ed 'n en,'ron$ental 'ss es and co$$ n'ty 'n,ol,e$ent 0. " )'de breadth o* prod ct l'nes 's o**ered 'n each store 9. M ch $ore kno)led-eable assoc'ates than those )ho )ork at a,era-e -rocery store Wea"nesses

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8. "s o* 2000, only 29> stores 'n the ;/, 9 'n Canada and = 'n ;n'ted D'n-do$ 2. 1he co$pany has c t back on -ro)th by open'n- less stores *or the ne2t *o r and hal* years <. 1he co$pany 's str --l'n- to $a'nta'n the'r h'-her $ar-'ns and pr'cey '$a-e d e to recess'on and 'ncrease 'n ne$ploy$ent >. 1he'r h'-h-end '$a-e and rep tat'on $ay ca se so$e c sto$ers to s)'tch to co$pet'tor.s stores =. 6nly 2= percent o* Whole Food shoppers pro,'de := percent o* total sales 9. 1he co$pany only spends 0.= percent o* the'r total sales on ad,ert's'n- and $arket'n:. C rrent asset )as red ced by C>= $'ll'on dollars *ro$ 200: to 2000 0. Ne-at',e cash *lo) 'n 2000 d e to c rrent l'ab'l'ty be'n- h'-her than c rrent asset by appro2'$ately C>> $'ll'on !inancial &atio Anal1sis (6ctober 2009+
3ro4t &ates 5 /ales (Atr ,s year a-o 3tr+ Net Inco$e (41D ,s 41D+ Net Inco$e (Atr ,s year a-o 3tr+ /ales (=-4ear "nn al ",-.+ Net Inco$e (=-4ear "nn al ",-.+ D','dends (=-4ear "nn al ",-.+ Price &atios C rrent P@5 Eat'o P@5 Eat'o =-4ear &'-h P@5 Eat'o =-4ear %o) Pr'ce@/ales Eat'o Pr'ce@!ook Fal e Pr'ce@Cash Flo) Eat'o Profit Mar$ins 5 Bross Mar-'n Pre-1a2 Mar-'n Net Pro*'t Mar-'n =4r Bross Mar-'n (=-4ear ",-.+ =4r Pre1a2 Mar-'n (=-4ear ",-.+ W ole !ood 2.<0 -80.20 8,000.=0 8=.:= -8.:2 N" W ole !ood <8.9 N" N" 0.>: 2.<< 9.:0 W ole !ood <>.< <.8 8.0 <>.9 >.8 2ndustr1 2.80 8<.<0 >:.<0 9.2= 8>.0< 89.92 2ndustr1 >2.2 =9.= 8=.0 8.:= :.20 29.90 2ndustr1 2>.0 >.9 <.8 2<.= >.= S6P +)) -=.00 -0.90 2:.20 8<.0> 82.>< 88.02 S6P +)) 2:.< 80.9 2.: 2.80 <.>< 8<.00 S6P +)) <0.0 9.: 9.0 <:.9 89.=

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=4r Net Pro*'t Mar-'n (=-4ear ",-.+ !inancial Condition Debt@53 'ty Eat'o C rrent Eat'o A 'ck Eat'o Interest Co,era-e %e,era-e Eat'o !ook Fal e@/hare "dapted *ro$ ))).$oneycentral.$sn.co$ Av$ P7E 09@09 09@00 09@0: 09@09 09@0= 09@0> 09@0< 09@02 09@08 09@00 20.>0 >0.20 <=.=0 >9.90 =<.=0 <:.90 <2.:0 <2.80 29.90 <9.>0 Debt7 E9uit1 0.<9 0.92 0.=2 0.08 0.08 0.80 0.22 0.20 0.9< N" Price7 Sales 0.=0 0.<9 8.0= 8.=< 8.92 8.>0 8.88 8.08 0.:0 0.::

2.> W ole !ood 0.<9 8.= 8.8 =.< 8.9 8>.=<

<.0 2ndustr1 0.>: 8.2 0.9 <.2 2.2 8>.28

88.= S6P +)) 8.82 8.= 8.2 2:.0 <.= 28.=:

Price7 Boo" 8.90 8.92 >.9: =.09 9.>8 =.=: >.22 >.28 >.20 >.>: &eturn on Assets /50 <.9 <.> =.: 80.0 :.2 0.= 0.0 0.: 9.2 <.0

8et Profit Mar$in /50 8.= 8.> 2.0 <.9 2.9 <.> <.8 <.0 2.< 8.9 2nterest Covera$e :.: 9.= :0.: 9999.0 80<.< 29.9 20.9 8<.9 9.2 9.:

09@09 09@00 09@0: 09@09 09@0= 09@0> 09@0< 09@02 09@08 09@00

Boo" Value7 S are C8>.=< C80.:> C80.>0 C80.09 C80.0= C:.98 C9.<< C=.80 C<.:> C2.90

&eturn on E9uit1 /50 :.2 :.9 82.= 8>.= 80.0 8<.9 8<.0 8<.9 82.9 9.>

"dapted *ro$ ))).$oneycentral.$sn.co$

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2nternal !actor Evaluation /2!E0 Matrix

#e1 2nternal !actors

Stren$t s 8. Cert'*'ed to sell or-an'c *ood 'n e,ery depart$ent 2. 52pected to ha,e C82 b'll'on 'n sales by 2080 <. Desp'te *lat sales 'n the last t)o years, the co$pany has had

Wei$ t

&atin$

Wei$ ted Score

0.00 0.0= 0.0= 0.0>

> < < <

0.<2 0.8= 0.8= 0.82

stron- control 'n keep'n- 'ts e2penses lo)

>. /o$e stores )ere b 'lt 'n lo)-'nco$e areas, $ak'n- the$ to

=. 9. :. 0.

be $ore co$pet't',e )'th other establ'shed and lo)er cost co$pet'tors 1he co$pany has '$ple$ented a str'n-ent cost control and red ct'on 'n cap'tal e2pend't re Ba'ned add't'onal $arket share )hen ac3 'red W'ld 6ats Market Inc., one o* the'r stron-est co$pet'tor 'n 200: &ea,'ly 'n,ol,ed 'n en,'ron$ental 'ss es and co$$ n'ty 'n,ol,e$ent " )'de breadth o* prod ct l'nes 's o**ered 'n each store a,era-e -rocery store

0.09 0.0< 0.0< 0.00 0.0>

< < < > <

0.80 0.09 0.09 0.<2 0.82

9. M ch $ore kno)led-eable assoc'ates than those )ho )ork at Wea"nesses 8. "s o* 2000, only 29> stores 'n the ;/, 9 'n Canada and = 'n 2. <. >. =. 9. :. 0.

0.0: 0.0> 0.09 0.0: 0.09 0.09 0.00 0.0: (.))

2 2 2 8 8 8 8 8

0.8> 0.00 0.82 0.0: 0.09 0.09 0.00 0.0: *.*+

;n'ted D'n-do$ 1he co$pany has c t back on -ro)th by open'n- less stores *or the ne2t *o r and hal* years 1he co$pany 's str --l'n- to $a'nta'n the'r h'-her $ar-'ns and pr'cey '$a-e d e to recess'on and 'ncrease 'n ne$ploy$ent 1he'r h'-h-end '$a-e and rep tat'on $ay ca se so$e c sto$ers to s)'tch to co$pet'torGs stores 6nly 2= percent o* Whole Food shoppers pro,'de := percent o* total sales 1he co$pany only spends 0.= percent o* the'r total sales on ad,ert's'n- and $arket'nC rrent asset )as red ced by C>= $'ll'on dollars *ro$ 200: to 2000 Ne-at',e cash *lo) 'n 2000 d e to c rrent l'ab'l'ty be'n- h'-her than c rrent asset by appro2'$ately C>> $'ll'on

'otal

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!.

SW.' Strate$ies
Stren$t s
8.

Wea"nesses
8.

2. <.

>.

=.

9.

:.

0.

9.

Cert'*'ed to sell or-an'c *ood 'n e,ery depart$ent 52pected to ha,e C82 b'll'on 'n sales by 2080 Desp'te *lat sales 'n the last t)o years, the co$pany has had stron- control 'n keep'n'ts e2penses lo) /o$e stores )ere b 'lt 'n lo)-'nco$e areas, $ak'n- the$ to be $ore co$pet't',e )'th other establ'shed and lo)er cost co$pet'tors 1he co$pany has '$ple$ented a str'n-ent cost control and red ct'on 'n cap'tal e2pend't re Ba'ned add't'onal $arket share )hen ac3 'red W'ld 6ats Market Inc., one o* the'r stron-est co$pet'tor 'n 200: &ea,'ly 'n,ol,ed 'n en,'ron$ental 'ss es and co$$ n'ty 'n,ol,e$ent " )'de breadth o* prod ct l'nes 's o**ered 'n each store M ch $ore kno)led-eable assoc'ates than those )ho )ork at a,era-e -rocery store

2.

<.

>.

=.

9.

:.

0.

"s o* 2000, only 29> stores 'n the ;/, 9 'n Canada and = 'n ;n'ted D'n-do$ 1he co$pany has c t back on -ro)th by open'n- less stores *or the ne2t *o r and hal* years 1he co$pany 's str --l'n- to $a'nta'n the'r h'-her $ar-'ns and pr'cey '$a-e d e to recess'on and 'ncrease 'n ne$ploy$ent 1he'r h'-h-end '$a-e and rep tat'on $ay ca se so$e c sto$ers to s)'tch to co$pet'tor.s stores 6nly 2= percent o* Whole Food shoppers pro,'de := percent o* total sales 1he co$pany only spends 0.= percent o* the'r total sales on ad,ert's'n- and $arket'nC rrent asset )as red ced by C>= $'ll'on dollars *ro$ 200: to 2000 Ne-at',e cash *lo) 'n 2000 d e to c rrent l'ab'l'ty be'n- h'-her than c rrent asset by appro2'$ately C>> $'ll'on

.pportunities

S%. Strate$ies

W%. Strate$ies

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8. Brocery stores are ranked

2. <.

>.

=.

9.

:.

0.

a$on- the lar-est 'nd stry 'n the ;n'ted /tates 6*ten re3 'res lo) )a-es and part t'$e e$ployees /tores o**er'n- add't'onal ser,'ces s ch as ready-toeat $eals, salad bars, co**ee shops 52pected Increase 'n reta'l sales a$on- lo) pr'ced stores Pr',ate %abel brand 's -ro)'n- rap'dly as a s bst't te to pre$' $ brands &'-h entry barr'ers *or a co$pany to open too $any stores 3 'ckly Cons $ers are $o,'n- to a $ore healthy eat'nhab'ts Weak econo$y ca ses cons $ers to c t back 'n eat'n- o t and spend'n$ore $oney by shopp'nto cook at ho$e

8. Eed ce the )'de breadth o* prod ct l'nes by s'nthe$ 'n 'n-store ser,'ces s ch as ready-t-eat $eals, salad bar, and other prod cts. (/0, 6<+ 2. 5stabl'sh a 7o'nt ,ent re pro-ra$ )'th or-an'c s ppl'ers to prod ce pr',ate label brands *or Whole Food and sell the$ at lo)er pr'ce (/8, 6=, 60+

8. Increase ad,ert's'n-

b d-et by sell'n- e2cess 'n,entory at red ced cost to e2'st'n- c sto$ers (W>, W9, 6>, 60+ 2. Create a pro$ot'onal d'sco nt card *or ne) and e2'st'n- c sto$ers (W>, W9, 6:, 60+

' reats
8. Not ,ery pro*'table per

2.

<.

>.

=.

9.

'te$ sold, o*ten only a penny on e,ery dollar sold Weak econo$'c cond't'ons ca s'ncons $ers to c t back, $any b y'n- -ener'c brands ;ne$ploy$ent 's 'ncreas'n- ca s'nc tback 'n b y'n- brandna$e prod cts Increase 'n * el cost co ld '$pact the p rchas'npo)er o* the cons $ers Increase 'n * el cost co ld ca se s ppl'ers to ra'se the'r pr'ces Con,en'ence stores are o**er'n- $ore brands and 'te$s *or '$p lse

S%' Strate$ies 8. "c3 're a s$all -rocery store cha'n 'n $arkets that c rrently Whole Food does not ha,e ade3 ate stores 'n lo)-'nco$e areas (/2, />, 1<, 1>, 1:+

W%' Strate$ies
8. Work )'th s ppl'ers and

ne-ot'ate *or better pr'c'nand ter$s on lo)er-end prod cts ( W=, W:, W0, 12, 1<+

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shoppers
:. Co$pet't'on 's stron-

a$on- -rocery store cha'ns

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3.

SPACE Matrix F/
Conservative
: 9 = > < 2 8

Aggressive

C/

I/
-: -9 -= -> -< -2 -8 -8 -2 -< -> -= -9 8 2 < > = 9 :

Defensive

-:

Competitive

5/

!inancial Stabilit1 /!S0 Eet rn on In,est$ent %e,era-e %'3 'd'ty Work'n- Cap'tal Cash Flo) !inancial Stabilit1 /!S0 Avera$e Competitive Stabilit1 /CS0 Market /hare Prod ct A al'ty C sto$er %oyalty Co$pet't'on.s Capac'ty ;t'l'Hat'on 1echnolo-'cal Dno)-&o)

> 2 8 8 < *.*

Environmental Stabilit1 /ES0 ;ne$ploy$ent 1echnolo-'cal Chan-es Pr'ce 5last'c'ty o* De$and Co$pet't',e Press re !arr'ers to 5ntry Environmental Stabilit1 /ES0 Avera$e 2ndustr1 Stabilit1 /2S0 Bro)th Potent'al F'nanc'al /tab'l'ty 5ase o* Market 5ntry Eeso rce ;t'l'Hat'on Pro*'t Potent'al

-> -2 -< -> -8 %*.:

-< -8 -< -= -9

2 < = < >

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Competitive Stabilit1 /CS0 Avera$e

%,.;

2ndustr1 Stabilit1 /2S0 Avera$e

,.<

4-a2's: F/ I 5/ J 2.2 I (-2.0+ J - 0.9 K-a2's: C/ I I/ J (-<.9+ I (<.>+ J - 0.2

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=.

3rand Strate$1 Matrix

&apid Mar"et 3ro4t Quadrant II Quadrant I

Wea" Competitive Position

Stron$ Competitive Position

Quadrant III

Slo4 Mar"et 3ro4t

Quadrant IV

8. Eelated D',ers'*'cat'on 2. ;nrelated d',ers'*'cat'on <. #o'nt Fent re

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2.

' e 2nternal%External /2E0 Matrix

' e 2!E 'otal Wei$ ted Score /tron<.0 to >.0 I ",era-e 2.0 to 2.99 II Weak 8.0 to 8.99 III

&'-h <.0 to <.99

IF

IF

FI

' e E!E 'otal Wei$ ted Score

Med' $ 2.0 to 2.99

W ole%!oods Mar"et> 2nc.

FII

FIII

IK

%o) 8.0 to 8.99

?.

@SPM
#o'nt ,ent re )'th s ppl'ers to prod ce or-an'c pr',ate label brand Wei$ t AS 'AS
0.0: 0.00

#e1 !actors .pportunities 8. Brocery stores are ranked a$on- the lar-est 'nd stry 'n the ;n'ted /tates 2. 6*ten re3 'res lo) )a-es and part t'$e e$ployees

Create pro$ot'onal d'sco nt card *or ne) and e2'st'nc sto$ers AS 'AS ---------

-----

-----

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<. /tores o**er'n- add't'onal ser,'ces s ch as ready>. =. 9. :. 0.

0.09 0.00 0.09 0.0= 0.09 0.09

< < < --> 2

0.80 0.2> 0.2: --0.<9 0.80

> > 2 --< >

0.2> 0.<2 0.80 --0.2: 0.<9

to-eat $eals, salad bars, co**ee shops 52pected Increase 'n reta'l sales a$on- lo) pr'ced stores Pr',ate %abel brand 's -ro)'n- rap'dly as a s bst't te to pre$' $ brands &'-h entry barr'ers *or a co$pany to open too $any stores 3 'ckly Cons $ers are $o,'n- to a $ore healthy eat'nhab'ts Weak econo$y ca ses cons $ers to c t back 'n eat'n- o t and spend'n- $ore $oney by shopp'nto cook at ho$e penny on e,ery dollar sold

' reats 8. Not ,ery pro*'table per 'te$ sold, o*ten only a 2. Weak econo$'c cond't'ons ca s'n- cons $ers to

0.0: 0.0: 0.09 0.0= 0.09 0.0> 0.0>

< 2 < --> 2 8

0.28 0.8> 0.80 --0.2> 0.00 0.0> *.(* 0.00 0.8= --0.00 ------0.00 ---

8 > > --2 < <

0.0: 0.20 0.2> --0.82 0.82 0.82 *.,* 0.<2 0.0= --0.82 ------0.<2 ---

c t back, $any b y'n- -ener'c brands <. ;ne$ploy$ent 's 'ncreas'n- ca s'n- c tback 'n b y'n- brand-na$e prod cts >. Increase 'n * el cost co ld '$pact the p rchas'npo)er o* the cons $ers =. Increase 'n * el cost co ld ca se s ppl'ers to ra'se the'r pr'ces 9. Con,en'ence stores are o**er'n- $ore brands and 'te$s *or '$p lse shoppers :. Co$pet't'on 's stron- a$on- -rocery store cha'ns '.'AA Stren$t s 8. Cert'*'ed to sell or-an'c *ood 'n e,ery depart$ent 2. 52pected to ha,e C82 b'll'on 'n sales by 2080 <. Desp'te *lat sales 'n the last t)o years, the co$pany has had stron- control 'n keep'n- 'ts e2penses lo) >. /o$e stores )ere b 'lt 'n lo)-'nco$e areas, $ak'n- the$ to be $ore co$pet't',e )'th other establ'shed and lo)er cost co$pet'tors =. 1he co$pany has '$ple$ented a str'n-ent cost control and red ct'on 'n cap'tal e2pend't re 9. Ba'ned add't'onal $arket share )hen ac3 'red W'ld 6ats Market Inc., one o* the'r stron-est co$pet'tor 'n 200: :. &ea,'ly 'n,ol,ed 'n en,'ron$ental 'ss es and co$$ n'ty 'n,ol,e$ent 0. " )'de breadth o* prod ct l'nes 's o**ered 'n each store 9. M ch $ore kno)led-eable assoc'ates than those )ho )ork at a,era-e -rocery store
Wea"nesses

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0.00 0.0= 0.0=

8 < --2 ------8 ---

> 8 --< ------> ---

0.0>

0.09 0.0<

0.0< 0.00 0.0>

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8. "s o* 2000, only 29> stores 'n the ;/, 9 'n Canada

0.0: 0.0> 0.09

----2 2 2 2 > >

----0.82 0.8> 0.80 0.82 0.<2 0.20 (.++ ,.;-

----< > > > 8 8

----0.80 0.20 0.<9 0.2> 0.00 0.0: *.)* <.,<

and = 'n ;n'ted D'n-do$ 2. 1he co$pany has c t back on -ro)th by open'nless stores *or the ne2t *o r and hal* years <. 1he co$pany 's str --l'n- to $a'nta'n the'r h'-her $ar-'ns and pr'cey '$a-e d e to recess'on and 'ncrease 'n ne$ploy$ent >. 1he'r h'-h-end '$a-e and rep tat'on $ay ca se so$e c sto$ers to s)'tch to co$pet'torGs stores =. 6nly 2= percent o* Whole Food shoppers pro,'de := percent o* total sales 9. 1he co$pany only spends 0.= percent o* the'r total sales on ad,ert's'n- and $arket'n:. C rrent asset )as red ced by C>= $'ll'on dollars *ro$ 200: to 2000 0. Ne-at',e cash *lo) 'n 2000 d e to c rrent l'ab'l'ty be'n- h'-her than c rrent asset by appro2'$ately C>> $'ll'on SBB'.'AA SBM '.'AA A''&AC'2VE8ESS SC.&E

0.0: 0.09 0.09 0.00 0.0:

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#.

&ecommendations

8. C rrently, the co$pany ad,ert'ses less than 0.= L o* 'ts re,en e )h'ch 's appro2'$ately C<9,:99,=90, ro -hly C8>2,0<> per store. 1he co$pany can create d'sco nt card and 'ntrod ce 't as part o* the c rrent ad,ert's'n- ca$pa'-n. "ss $'n8L rede$pt'on ,al e, the cost to the co$pany )o ld be C00 $'ll'on.

A.

EPS7EB2' Anal1sis
C "$o nt Needed: 00M /tock Pr'ce: C29 1a2 Eate: >>L Interest Eate: :L M /hares 6 tstand'n-: 8>0.= M
Common Stoc" !inancin$ Recession Normal Boom C2<9,2<0,000 C<00,000,000 C>00,000,000 0 0 0 2<9,2<0,000 <00,000,000 >00,000,000 80<,9>>,:20 8<2,000,000 8:9,000,000 8<2,29<,200 890,000,000 22>,000,000 8><,=:9,92< 8><,=:9,92< 8><,=:9,92< ).C* (.((.+; -) Percent Stoc" % ,) Debt !inancin$ Normal C<00,000,000 =,900,000 29>,>00,000 829,=<9,000 89>,09>,000 8>0,=00,000 (.(-

5!I1 Interest 5!1 1a2es 5"1 M /hares 5P/

Recession C2<9,2<0,000 =,900,000 2<0,9<0,000 808,>00,:20 829,8=:,200 8>0,=00,000 ).C* -) Percent Debt % ,)

Boom C>00,000,000 =,900,000 <9>,>00,000 8:<,=<9,000 220,09>,000 8>0,=00,000 (.+-

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5!I1 Interest 5!1 1a2es 5"1 M /hares 5P/

Percent Debt Recession C2<9,2<0,000 >,>00,000 2<8,:=0,000 808,9:<,=20 829,:0>,>00 8>2,9=<,0>9 ).C(

Normal C<00,000,000 >,>00,000 29=,=20,000 8<0,020,000 89=,>98,200 8>2,9=<,0>9 (.(;

Boom C>00,000,000 >,>00,000 <9=,=20,000 8:>,020,000 228,>98,200 8>2,9=<,0>9 (.++

Percent Stoc" Recession C2<9,2<0,000 8,820,000 2<=,880,000 80<,>=8,920 8<8,999,000 8>8,>2<,0:: ).C,

Normal C<00,000,000 8,820,000 290,000,000 8<8,=0:,200 89:,<:2,000 8>8,>2<,0:: (.(:

Boom C>00,000,000 8,820,000 <90,000,000 8:=,=0:,200 22<,<:2,000 8>8,>2<,0:: (.+:

M.

Epilo$ue

For the *'rst s'2 $onths o* the'r *'scal year 2009, Whole Foods sales )ere C>.< b'll'on. I* second hal* o* the year sales are cons'stent )'th 'ts year to date res lts, total sales sho ld be 7 st nder C0.0 b'll'on. 1h's )o ld be 'dent'cal to 2000 sales. C56 #ohn Mackey )as 3 oted as say'n-, Ndesp'te *lat sales year o,er year, )e e2h'b'ted strone2pense control lead'n- to a 80L 'ncrease 'n 'nco$e.O Wh'le *'rst-hal* 2009 sales )ere *lat and 'nco$e p sl'-htly, co$parable store sales decreased >.>L ,ers s an 0.2L 'ncrease 'n the pr'or year. Desp'te str'cter *ederal re3 're$ents, Whole Foods Market re$a'ned co$$'tted to or-an'c cert'*'cat'on. In No,e$ber o* 2000, the ;/D".s Nat'onal 6r-an'c Pro-ra$ declared there co ld no lon-er be N-ro pO cert'*'ed stores and that each store had to be cert'*'ed 'nd','d ally. 1h's )as a chan-e *ro$ a sa$pl'n- $odel that had been sed pre,'o sly. #oe D'ckson, 3 al'ty standards coord'nator *or Whole Foods re$arked, N)h'le so$e cert'*'ed reta'lers $ay ha,e 7 st a *e) depart$ents cert'*'ed, and *oc s on shr'nk-)rapped or-an'c prod ce, )e.,e opted to -o all o t, 'n o r stores, e,ery depart$ent that handles or-an'c *ood 's cert'*'ed P prod ce, $eat, b lk, cheese, e,en stores )'th or-an'c salad bars are cert'*'ed.O "t the end o* the second 3 arter 2009, the co$pany had 200 stores total'n- 80.< $'ll'on s3 are *eet. 6nly se,en ne) stores )ere opened 'n the *'rst hal* o* the year, three o* )h'ch )ere relocat'ons. 6,er the years, Whole Foods b s'ness $odel has been centered on rap'd e2pans'on dr','n- re,en e -ro)th. In the'r e**ort to conta'n costs rather than ra'se pr'ces, th's rap'd e2pans'on plan has been c t 'n hal*, $aybe $ore. "s o* the s $$er o* 2009, the co$pany only had plans to open a total o* 90 stores 'n the ne2t *o r and a hal* years. F rther$ore, they had 'ntent'ons o* only enter'n- e'-ht ne) $arkets )'th these 90 ne) stores. It $ay be hard to 7 st'*y the b 'ld'n- o* e,en b'--er stores (the a,era-e s'He *or the'r ne)er stores 's =9,000 s3 are *eet+ -',en tra**'c 's do)n and the'r c sto$ers are b y'n- less each tr'p. /o$e o* the'r ne)er stores )ere also b 'lt 'n lo)er 'nco$e areas, br'n-'n- the$ 'nto d'rect co$pet't'on )'th $ore establ'shed and lo)er cost co$pet'tors. "s the recess'on dra-s on and ne$ploy$ent cont'n es to -ro), $any econo$'sts *ear an e,en deeper retrench$ent shopp'n- pattern *or the cons $er. "ll o* th's 'ncreases the co$pany.s str --le to $a'nta'n the'r h'-her $ar-'ns and pr'cey '$a-e.
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Wh'le the co$pany cont'n es to earn accolades (they )ere only 8 o* < co$pan'es to rece',e the 2009 /oc'ally Eespons'ble Eeta'ler ")ard *or the Whole Planet Fo ndat'on+ the'r * t re o tlook re$a'ns $ rky. I* yearly earn'n-s cont'n e to *all 'n 2009, 't )o ld be the th'rd year 'n a ro) *or lo)er net 'nco$e. %'ke $any other b s'nesses, analysts. sent'$ents are $'2ed. 6ne says that Whole Foods Market str'n-ent cost controls and red ced cap'tal e2pend't res )'ll ser,e the$ )ellQ another bel'e,es that shoppers )'ll l'kely cont'n e to scale back the'r tr'ps to Whole Foods beca se o* 'ts Nh'-h-endO rep tat'on.

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