Whole Foods Market Operating activities analysis report by Rebekah Leybold

Introduction

  • One of the leading grocery stores in the natural and organic food industry
  • First national "Certified Organic" grocery store
  • Main goal is to “promote the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available” (Whole Foods Market, 2015)

Core Income Sources

  • Percentage of sales by product category included 19% for prepared foods and bakery, 48% for other perishables and 34% for non-perishables (WFM, 2016)
  • Marketing includes 900 social media channels and posts over 1,000 messages on the internet each day, targeting specific markets and increasing profits
  • Main source of income is provided by the sale of high-quality natural and organic products
  • Natural product sales have increased in the United States by over 9% this year
  • In 2016, Whole Foods reached a record total of sales of $15.7 billion

Comprehensive Income Sources

  • Foreign currency translation adjustment account recorded loss over the last 2 years
  • Account used for international market to exchange currencies
  • Available for sale securities, reported at fair value
  • In 2015, WFM had approximately $218 million in available for sale marketable securities (WFM, 2016)

Quality of Earnings

  • From 2015 to 2016, sales increased from around $ 14 billion to over $15 billion
  • Leader in the natural and organic food industry
  • Whole Foods has documented progress on company initiatives, releasing information on their success of sales in the prepared foods industry and their two-year $300 million expense reduction goal (Whole Foods Market, 2016).

Operating and Non-operating Sources of Earnings

  • Earnings before income and tax are an operating sources for WFM
  • EBIT decreased by over $1 million from 2015 to 2016, while sales are still continuing to increase
  • Non-operating sources such as dividend income, gains and losses from foreign exchange, and profits or losses from investments

Permanent and Transitory Earnings

  • Permanent earnings for WFM are characterized by purchases that are being repeated by the customer base on a daily basis
  • Products such as produce, milk, eggs, and meat that customers are buying every week
  • Transitory earnings are short bursts of income that are a result of change within a business
  • Includes investments from private companies or investors

Projected Future Earnings

  • WFM is targeting a sales growth of over 4%, the building of 30 new stores, reaching a diluted EPS of $1.42 or greater, and many other outlooks for the upcoming year (Whole Foods Market, 2016).
  • Has maintained stability compared to other competitors’ store sales in the last few years
  • Plans to reduce cost structure and expenses in the upcoming year in hopes for higher earnings and stability for the company by implementing new strategies throughout the market

Conclusion

  • WFM is the leader in the natural and organic food market, but is facing fierce competition by Costco, Kroger, Trader Joe’s and other stores
  • The company promotes the health of its stakeholders by providing healthy eating education (Whole Foods Market, 2015)
  • WFM is utilizing their operating activities to continue to be determined to sell certifiably organic food, while providing excellent customer service and satisfaction on a daily basis

References

Whole Foods Market. (2016). Investor Relations. Retrieved February 20, 2017, from http://investor.wholefoodsmarket.com/investors/financial-information/annual-reports-and- proxy/default.aspx

Whole Foods Market. (2016, November 18). SEC Filings. Retrieved February 20, 2017, from http://investor.wholefoodsmarket.com/investors/financial-information/sec-filings/2016/default.aspx

Credits:

Created with images by Masahiro Ihara - "Vegetables in Whole Foods Market"

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