This report is written in order to perform financial analysis on Whole Foods Market Inc and its competitor Safeway Inc. This in depth report is both to determine which company is doing financially better and how also how they are doing comparing them to their whole industry. The ratios in this report are going to be used to compare WF to its competitior and also to compare its financial performances to the whole Grocery store industry (SIC: 5411) to see how Whole Foods Inc is doing in regards to the whole industry. It is crucial to compare a company’s ratios with the industry’s, because they may appear good or bad when comparing with the company’s competitors, however, when comparing these ratios to the industry a different conclusion could be drawn. Another purpose of this paper is to show the trends and relationships of this company which will allow us to assess Whole Foods’ weaknesses and strength. In this report, you will come across profitability ratios, liquidity ratios and asset utilization ratios of both companies and also the industry’s. Background
Both Safeway and Whole Foods Market are major players in the Grocery stores industry and they are both leading the natural organic food field. from a Wall Street perspective, the highest profile player in natural / organic foods is likely Whole Foods (WFMI). The company’s revenues have increased 18% a year, on average (Value line). The company’s merchandise line of over 1,500 items includes organically grown. he company owns about 287 store locations in 38 states and Washington, D.C., as well as five stores in the U.K and Canada. From 2010 through 2013, Whole Foods plans to open 53 new stores, including eight relocations(Plunkett research). The original whole foods Market opened in 1980 in Texas with a stuff of 19 only. Safeway Inc opened its first store in 1915 in Idaho. Safeway Stores, is one of the largest food retailers in North America, operating 1,712 stores. The company recently expanded its O Organics line of certified organic foods and beverages to over 300 exclusive products. Exhibit 1: source Industry ratios : retrieved November 4th 2010 from ,Reuters.com | | | |Whole foods | | | | | |2005 |2006 |2007 |2008 |2009 |Industry | |ROA |7.22% |9.98% |5.69% |3.39% |3.88% |2.38 | |Profit Margin |2.90% |3.63% |2.77% |1.44% |1.83% |1.8 |
| | | |Safeway | | | | |2005 |2006 |2007 |2008 |2009 | |ROA |3.56% |5.35% |5.03% |5.52% |-7.78% | |Profit Margin |1.46% |2.17% |2.10% |2.19% |-2.69% |
In analyzing the profitability ratios, we see that WF had better profit margin than Safeway every year in the last five years, except 2008. However in 2009, WF’s profit margin was 0.3%lower than the industry’s average. In 2008, safeway outperformed WF’s profit margins 0.75%. However, in 2009 Safeway had a negative profit margin due to their net income loss. Looking at both company’s profit margins in 2008 and 2009, we can conclude that both companies are struggling to make high profit margins. WF’s (ROA) suggests a good profitability from 2005 to 2007; however, it started to decline in 2008 and 2009. WF’s (ROA) was 1.5% higher than the average industry ratio.Safeway’s ROE rations were lower...