Whole Foods Shares Now More Attractive

We may slightly lower our $44 fair value estimate for narrow-moat

The market continues to remain concerned about Whole Foods' sluggish same-store sales growth, which increased 2.2% (excluding the timing shift from Easter and up 1.3% on a constant-currency basis) during the quarter. We were encouraged by the fact that traffic (up 0.5%) and average basket (up 1.7%) are increasing, even if the rate is slower than in the past, and we still think the market's near-term concerns are somewhat overblown. Same-store sales growth slowed in the last few weeks of the quarter, which management attributes to the New York City Department of Consumer Affairs' allegations that some products were mislabeled in New York stores. Overall, new stores (less than five years old) continue to generate very strong growth, while older stores have generated more sluggish results.

Morningstar Premium Members gain exclusive access to our full Analyst Reports, including fair value estimates, consider buying/selling prices, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.