The purpose of this paper is to conduct a comparative analysis of two grocery chains, Whole Foods Market and Kroger Co. Research material obtained from each company will allow judgments to be made concerning potential investment decisions. This study will focus on financial statements such as the income statements, balance sheets and cash flows from each company over the past three years that allow investors the needed insight about a company’s performance. In addition to these areas, we will be looking at opportunities, and trends within the market that are also useful in making effective investment decision. The structure in which each company operates and the products and service each provide will also help us understand the ways each company is strong and where we might find weaknesses. By comparing SWOT analysis, key ratios and financial data our conclusion will determine which of the two organizations provide the best opportunities for investors.
A Comparative Analysis of the Grocery Chains: Whole Foods Market and Kroger Co. Brief history
Whole Foods Market began operations during 1980 in Austin Texas and experienced rapid growth as a grocer providing high quality natural and organic food products. They are currently the leader within this industry as the potential markets are receptive to the healthy options that they provide. In addition to the operations held within the United States Whole Foods has also expanded into the UK and Canada and acquired other natural grocers such as Wild Oats and the Bread of Life.
Kroger incorporated in 1902 and to many the company name provides some reference to a grocery store, however they also operate other large retailers such as City Market, Dillon’s, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs and Smith’. “Of these stores, 1,014 have fuel centers, 784 convenience stores and 361 fine jewelry stores. Kroger operates 40 manufacturing plants, primarily bakeries and dairies, which supply approximately 40% of the corporate brand units sold in retail outlets”. (AnnualReports.com, 2010, p. 11) Income Statement
Investors study key factors about an organizations performance. First, they want to look at areas that show organizations potential for growth as well as any debt obligations. Additionally an investor will find interest in the ways that the organization manages its cash flows, also potential investor that are looking to buy stock want to find out what a company is worth in terms of shareholders equity. “Learning how to analyze an income statement is fundamental to smart investing. The annual income statement is the evaluation of the company’s financial dealings, and can be used to help determine if it would be a worthwhile investment” (Young). For many an organizations net income would simply signify a profit, which would allude to a good investment potential however, the company must also possess the ability for continued sales growth to viewed as a viable investment option. For the purpose of this paper, we will look at the financial information obtained from Kroger and Whole Food Markets. Kroger
Kroger’s profit margins for 2009 through 2011 were 0.09%, 1.36%, and .67% respectively. Their returns on assets were .30%, 4.83%, and 2.56% and return on equity for 2009 through 2011 was 1.33%, 22.66 % and 11.36%. Kroger provides an explanation for the fluctuations in 2010 within its annual report and states that: Net earnings totaled $1.1 billion in 2010, $70 million in 2009 and $1.2 billion in 2008. The net earnings for 2010 include a non-cash goodwill impairment charge totaling $12 million, after-tax, related to a small number of stores. The net earnings for 2009 include non-cash asset impairment charges totaling $1.05 billion,...