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Case 2: Whole Foods Company

Morgan La Femina

MBA 710

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Company History:

Whole foods is natural foods, fresh foods supermarket chain. John Mackey, Rene Lawson Hardy,

Craig Weller and Mark Skiles founded the whole foods market in Austin, Texas. Originally, in 1978 Rene

Hardy and John Mackey borrowed 45,000 dollars from relatives to open a natural foods store in Austin

Texas. Two years later, they partnered with Craig Weller and Mark Skiles merging their natural foods

store SaferWay with Weller and Skiles Clarksville Natural Grocery. The resulting new natural foods store

was named Whole Foods Market and opened in 1980. This store had 10,500 square feet and a total staff

of 19. Whole Foods Market began to expand from Austin to Houston, Dallas and New Orleans beginning

in 1984. In 1989, expansion began on the West Coast with a Super Market in Palo Alto, California. Other

Supermarkets in North Carolina, Detroit, Boston and on the east coast were opened through the 1990’s.

This round of store growth was fueled primarily by acquiring Food for Thought and Harry’s Farmers

Market stores in2001, located in northern California and Atlanta respectively. In 2002, Whole foods

acquired Fresh and Wild in the United Kingdom. Another venture, Wholefoods.com was developed in

1999 and WholePeople.com in 2000. Later in 2000, WholePeople.com merged with Gaiam, Inc. and

WholePeople.com was subsequently replaced with Gaiam.com.

Mission Statement Analysis:

"Whole Foods Market is a dynamic leader in the quality food business. We are a mission-driven company

that aims to set the standards of excellence for food retailers. We are building a business in which high

standards permeate all aspects of our company. Quality is a state of mind at Whole Foods Market."

Overall analysis of the mission statement

Whole Foods Market’s core values are to provide natural perishable food products that are

wholesome and safe to eat, provided by employees who work as a team, where they can flourish and

grow as individuals. Unfortunately, these values are not stated in their mission statement. Whole Foods

Market mission statement unusually says they are a mission driven company, but the only value

promoted is quality. Their core values can be found not in their mission statement but in various sections

of their financial documents and literature. These values should be aggregated into the mission

statement. This is important for Whole Foods as a company because much of their expansion has been

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through the acquiring of other natural food stores chains. These acquired stores may have internal

cultures dissimilar to Whole Foods whereby Whole Foods would benefit by a strong mission statement.

Components of the mission statement:

1. Customers (Who are they?)

Their mission statement does not mention their customers however; other documentation from

Whole Foods mentions their customers as the public and to large extent farms, which are local to each

Whole Foods store.

2. Products or Services (What are they?)

Whole Foods products and services are not listed in their mission statement; however, their 10k

mentioned their products as fresh produce, fresh fruit, organic products, hormone free milk and cheese,

meats from animals raised without hormones, antibiotics and eggs from cage free hens.

3. Markets (Where are they doing business?)

Whole Foods mission statement does not state their markets however, this information can be

found in their financial statements. Whole Foods primarily does business in America, Canada and in the

United Kingdom. Specifically they have markets in Alabama, Arizona, Arkansas, California, Colorado,

Connecticut, DC, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,

Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York,

North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas,

Utah, Virginia, Washington, Wisconsin and overseas in the UK and Canada.

4. Technology (How is it used by the company?)

Technology is not mentioned in Whole Foods mission statement however, they do mentioned a

very detailed food inspection process, the tracing of food from farm to store to insure the nature of the

food is known and how the stores are organized, by teams and team leaders.

5. Concern for Survival and Growth (Profits, etc.)

Whole Foods mission statement indirectly mentions survivability and growth when it speaks of

high standards of excellence and inherent quality. There survivability is based on providing a wide variety

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of high quality organic foods to customers by experienced friendly team members. This strategy

differentiates them from other chain supermarket stores allowing them to compete not on price or

volume but on quality, culture and customer experience.

6. Philosophy (Any?)

Whole Foods philosophy is stated to be a company that is a leader in providing high quality foods

to customers. They set high standards for the food products they sell, the employees they hire and what

distributers they purchase their foods from. These farms and distributers must meet the premium

standards set by Whole Foods for Whole Foods to purchase products from them for resale to the public.

Whole Foods as a company is committed to providing the customer a viable and healthy alternative to

supermarket food while supporting the local community.

7. Self-Concept (Distinctiveness?)

Whole Foods self-concept is only partially apparent in their mission statement. They wish to be

the leader in providing high quality foods to the public. However, in their literature expands on this in

that they view high quality food as an extension of living a whole value filled life. They see whole food as

a lifestyle, including eating healthy food, eating the right foods, exercising, excelling in work, being

vested as a person in the community and being involved in the culture of each community they have a

store in. The company sees itself as an extension of the communities they serve not just a supermarket

selling to those people who happen to enter the store.

8. Concern for Public Image

Whole Foods is concerned about their public interest. Their existence as a company is inherently

dependent on the image they project to the communities they serve. If they do not prove to the public

that they live the Whole Foods mission of quality then they may lose the trust of their customers and

their patronage. They believe their strength is dependent on their employee’s team members, their high

standards, their motivation and their sense of purpose. They as a company support the health and well-

being of their customers, their employees and seek to express this to the public. Whole Foods is

concerned about their public image and the expression of their internal corporate image, externally

because the company’s future depends on their public image.

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9. Concern for Employees

Whole Foods mission statement only mentions dynamic leadership and high standards, which

permeate the organization. Whole Foods literature states that they seek to promote a sense of

egalitarianism and shared fate. They seek to provide each team member a sense of purpose and mission,

They offer a type of gain sharing program, stock options and the company offers a 401k program for its

employees. However, their voluntary turnover for employees in 2008 was 23%.

External Analysis:

Industry Analysis: The External Factor Evaluation (EFE) Matrix for Whole Foods

Key External Factors

Opportunities Weight Rating Weighted

Score

1 Higher quality products than industry 0.12 4 0.48

2 Emphasis on organic farming, humane grocery 0.11 3 0.33

3 Collaborating with local farming 0.1 4 0.40

4 Strong customer trust in store and brand 0.08 4 0.32

5 Opportunistic real estate strategy 0.09 3 0.27

Threats

1 Increased price pressure from fresh foods 0.13 2 0.26

2 Intensely competitive industry 0.12 2 0.24

3 Potential new regulatory practices 0.09 3 0.27

4 Significant indebt with interest 0.10 1 0.1

5 High ratio of perishable products as opposed to

other companies in the industry

0.06 2 0.12

Total 1

The average total weighted score is 2.79

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Rational:

Whole Foods total weighted score is 2.79, which is slightly above average for companies in the

grocery/supermarket industry. Whole Foods is taking advantage of their opportunities but is responding

poorly to its threats, many of them long term in nature.

External Opportunities:

1. Higher quality products than industry

Whole Foods is a market leader in providing high quality organic and all natural foods to the

public. They are able to compete with larger supermarket chains on quality and partially on cost but

quality is the key differentiator from others in the industry.

2. Emphasis on organic farming, humane grocery

Unlike other chain supermarkets customers know the history of the food products

purchased at a Whole Foods supermarket. This background food history knowledge is unique among

the industry and creates a market for those potential customers who value this type of information.

It is the ability to trace and determine the quality of the food sold at Whole Foods that creates a

market opportunity for the company against its larger competitors.

3. Collaborating with local farming

Whole Foods purchase much of its stock from farms that are local to each store. This

collaboration creates a cultural bond between the farmer, the customer and the stores, which Whole

Foods operates. This culture in turn creates brand loyalty that is stronger that it would be between

their customers and others in the industry.

4. Strong customer trust in store and brand

Whole Foods customers know what they are buying when they make a purchase at their stores.

They know that Whole Foods reputation for providing organic fruits and vegetables and humanly

grown and processed meats must be maintained for the company to be viable. This may not be the

case with its competition.

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5. Opportunistic real estate strategy

Whole Foods purchases premium real estate on sites where there is existing trade and where

square footage is optimal. They seek to acquire other smaller local and regional chains located in

desirable areas that have existing experienced employees. In addition, Whole Foods is relocating

several of its smaller stores to larger areas with better visibility and parking. This has given them an

overall 124% increase in size.

External Threats:

1. Increased price pressure from fresh foods

Any dramatic change in weather patterns for a growing season or for several growing

seasons can cause an increase in the price of fresh fruits and vegetables. As they select high

quality foods for sale at their stores, any increase in price and a decrease in quality can impact

their sales and the reputation of the company. An increase in food prices followed by the

inability to find enough high quality food products in a category could be detrimental to the

company’s profits.

2. Intensely competitive industry

Whole Foods faces intense competition from other supermarket chains. They face

competition from regional supermarkets, other natural type supermarket chains such as Trader

Joes, Wegman’s, and Fresh Market chain, national chains such as Wal-Mart, club type stores,

smaller local sites, farmers markets and emerging food delivery companies. Any change in their

strategy will not only affect Whole Foods but others in the industry. These companies compete

on all levels Whole Foods competes at though Whole Foods attempts to differentiate itself on

the quality and nature of the products they sell.

3. Potential new regulatory practices

Any change in regulations that restrict or relax rules on how food is inspected, grown,

certified and stored can negatively affect Whole Foods. If the regulations on what qualifies as

certified organic are relaxed other supermarkets will benefit against Whole Foods. If current

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rules on how a food is stored are enacted then this could increase Whole Foods storage costs. If

the company is required to change or add labeling to certain products this could reduce those

products profit and the company’s revenue.

4. Significant indebt with interest

In 2009, Whole Foods had sizable indebtness with interest. The companies 10k states

that their future revenue may be significantly reduced because of their need to pay this debt.

Any significant debt in relation to revenue can be detrimental to a company.

5. High ratio of perishable products as opposed to other companies in the industry

Unlike other supermarket chains, Whole Foods has a much higher percentage of

perishable products. This increases their product loss as opposed to others in the industry. Any

significant product lost will be detrimental to the company.

Porters Analysis:

Rivalry among competitors:

High – They face very strong competition from other supermarket chains and small individual stores. This

competition is from similar stores as well as superstores. They face completion from similar format

supermarkets such as Trader Joe’s, Sunflower Farmers Market, Fresh Market chain and Central Market

stores. In addition, Whole Foods also faces completion from more traditional supermarket chains such as

Wal-Mart, Kroger, Safeway, Albertson’s, and Winn-Dixie.

Potential entry of new competitors:

High – Whole Foods faces a high likelihood of potential new competitors. These new competitors can be

growing mom and pop grocery stores, expanding smaller similar format supermarkets such as Sunflower

Farmers Market, Central Markets and Jungle Jim’s. New competitors can come from large superstores

such as Wal-Mart should they expand into the organic foods market.

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Potential Substitute of products:

High – Foods can be substitute most readily for other foods of equal quality costing less, lower quality

costing less or a different product altogether. Not only can one food be substituted for another but can

be purchased at a different supermarket so lower priced discounters of organic and natural foods can

compete with Whole Foods on cost and quality.

Bargaining power of suppliers:

Low – Food products originate at farms, these farms sell to intermediaries who then sell it to food

processing facilities. It is these intermediaries, food processing companies and wholesalers who have the

most bargaining power in relation to suppliers. Farms and cattle ranches for example do have some

bargaining power based on the volume of fruits and vegetables harvested or cattle sold but they are

dependent on the environment and the volume of foodstuffs produced by other farmers.

Bargaining power of consumers:

High – Consumers have a high level of bargaining power in relation to supermarkets. Shoppers can chose

from a variety of grocery stores within a few miles of their home, they can chose what types of food

stuffs to buy in a store and they can shop at multiple stores to complete their entire purchase. In

addition, shoppers can substitute one food for another, chose products based on price, quality, sale,

marketing, its packaging, freshness, shelf life and many other characteristics.

Target Scope

Low Cost Product Uniqueness

Broad Cost Leadership Strategy

Differentiated Strategy

X

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Narrow Focused Strategy (low cost) Focused Strategy (Differentiation)

Porter rational:

Whole Foods will have to select a broad product line that is differentiated from other

supermarkets with a strong focus on perishable foods. They will need to compete not only on quality but

also on cost for the next few years unlike previously where they competed only on quality and variety.

They need to lower their operating costs or other internal costs in order to lower the overall cost of the

perishable goods they sell to the public. Because Whole Foods expanded as a company during better

economic times, they must now factor in the possibility of a permanent change to consumers shopping

patterns. These altered shopping patterns are being shaped by high unemployment, low economic

growth and stalled wages. Unless Whole Foods offers a variety of fresh food products that appeal to

cost conscious buyers, other competitors like Trader Joe’s, Wegman’s and Safeway will expand market

share while Whole Foods will lose market share.

The Competitive Factor Evaluations Matrix:

Whole

Foods

Trader

Joe’s

Wegman’s

Critical Success Factors Weight Rating Score Rating Score Rating Score

Brand recognition 0.13 4 0.52 4 0.52 4 0.52

Product Quality 0.13 4 0.52 4 0.52 4 0.52

Price Competitiveness's 0.12 2 0.24 3 0.36 4 0.48

Management 0.12 3 0.36 4 0.48 4 0.48

Financial Position 0.13 2 0.26 3 0.39 3 0.39

Customer Loyalty 0.12 4 0.48 4 0.48 4 0.48

Global Expansion 0.12 3 0.36 2 0.24 2 0.24

Market Share 0.13 4 0.52 3 0.39 3 0.39

Total 1.00 3.26 3.38 3.50

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The Competitive Factor Evaluations Matrix shows that Whole Foods is only marginally positioned

against its competitors Trader Joe’s and Wegman’s. They need to not only compete on price but on

reputation, quality, variety and cost. They have over expanded their store numbers and as a result have

incurred a large amount of debt. Their purchase of Wild Oats caused a significant lost to be incurred by

Whole Foods and shopping at Whole Foods stores has declined by 19%. In addition, on average only 28

dollars is spent by shoppers at Whole Foods while its nearest competitors all average higher, Trader Joe’s

averages 38 dollars spent per shopper while Safeway averages 45 dollars spent per shopper per store

visit. Whole Foods needs to cut costs, increase value and maintain or expand on the variety of high

quality low cost fresh foods in order to maintain its profitability.

Internal Factor Evaluation Matrix:

Industry Analysis: The Internal Factor Evaluation (IFEM) Matrix

for Whole Foods

Key Strengths Weight Rating Weighted

Score

1 Brand recognition 0.12 3 0.36

2 Consumer good will towards company 0.09 3 0.27

3 Partnered with local farmers 0.1 3 0.30

4 Increase low cost/high quality product

development

0.1 2 0.20

5 Strong employee empowerment 0.09 3 0.27

Key

Opportunities

1 Train and develop new managers for senior

roles in the company

0.1 2 0.2

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2 Close unprofitable stores 0.11 2 0.22

3 Reduce long term debt 0.13 2 0.26

4 Lower store costs/distribution costs 0.09 3 0.27

5 Strategic acquisitions and joint ventures 0.07 2 0.14

Total 1

The average total weighted score is 2.49

Rational:

The average total weighted score for Whole Foods is 2.49, which is just below average for

companies in the supermarket industry. Whole Foods faces strong competition from other supermarkets

in terms of organic certification, quality, freshness, uniqueness, variety, cost and location. Moreover,

Whole Foods has above average long term debt, has closed some of its Wild Oats supermarkets after

their acquisition, has over expanded its market base and has slowing same store sales. They also need to

train new managers for increasingly complex roles and groom them for upper management in the

unfortunate event of a key leader leaving the company. Whole Foods needs to leverage their brand

name and increase marketing as well as incentivize repeat customers return to their stores. They need to

retain quality employees and offer competitive pay for those knowledgeable in whole food products.

Key Strengths:

1. Brand recognition

Whole Foods needs to leverage their brand more than they have in the past few years. This can be

done by increasing in house branded foodstuffs as well as increasing marketing. They can increase

marketing through non-traditional channels, the internet and through mobile technologies. Whole Foods

can offer regional coupons and expand delivery options in areas where their stores are located.

2. Consumer good will towards company

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Whole Foods has moderately strong consumer good will. They can increase this good will through

saving or shopper cards, issuing coupons, partnering with other companies to issue discounts and

through the expansion of employee benefits packages. They can promote some of the good work they

accomplish such as advocating for the treating of farm animals humanly and how they purchase local

farmers produce.

3. Partnered with local farmers

Whole Foods has collaborated with local farms. They can expand this relationship to regional farms

and also promote this relationship with the public at large. They can invest in technologies that allow the

company to ship these farm products quickly to market and develop in store methods that would

maintain the foods freshness longer.

4. Increase low cost/high quality product development

The company needs to increase their assortment of low cost high quality products as well as expand

their in store brands. This is needed in order to offer increased value to customers in a faltering

economy. They also need to do this in order to increase same store purchases of which they rank last

among their competitors.

5. Strong employee empowerment

Whole Foods in 2009 had approximately 53,500 team members of which 43,000 were full time.

Whole Foods involves their team members at all levels of their business. They also award team members

with stock options, leadership grants and service hour grants. Team members are provided with benefits

and are able to vote on the makeup of those benefits every three years.

Key Opportunities:

1. Train and develop new managers for senior roles in the company

Whole Foods needs to aggressively train and groom new leaders for senior roles within the company.

As of 2009, all Whole Foods executive officers were in their mid-fifties with John Mackey the CEO and of

the original founders age 56 with 31 years tenure. With each executive officer having at least 10 years

tenure, any one of them leaving could be detrimental to the management of the company. If Mackey

leaves much of the knowledge that created and also maintains the viability of Whole Foods will be lost.

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2. Close unprofitable stores

Not only has Whole Foods closed half of its Wild Oats stores but it may need to close more of them

and several Whole Food supermarkets as well. It needs to eliminate stores that are not profitable and

focus on those that are profitable while paying off its long-term debt.

3. Reduce long term debt

As of 2008 Whole Foods is almost a billion dollars in debt much of it from its acquisition of Wild Oats

along with 36 million in interest alone. In 2008, Whole Foods posted a negative net working capital of 46

million dollars along with 2.1 billion in store operating expenses. As a company, Whole Foods cannot

continue to operate with such high store expenses, debt and interest payments for long without

declaring some type of reorganization.

4. Lower store costs/distribution costs

Whole Foods must lower its store operating costs, its distribution costs as well as the costs of its

goods. Its store operating expenses for 2009 were 2.1 billion dollars, while its cost of goods sold was 5.2

billion. This is opposed to their sales of only 7.95 billion dollars. Their distribution in relation to their

competitors is not as efficient and is comparably inefficient by Wal-Mart and Safeway’s standards.

5. Strategic acquisitions and joint ventures

Whole Foods must stop acquiring other supermarkets but strengthen relationships with farms,

farmers and perhaps retailers. They could offer benefits to those who shop frequently with them for

other stores such as by providing discounts at retailers for items such as clothes and household items.

They also could negotiate long-term contracts with farmers for future guaranteed deliveries of produce

barring unforeseen events, which might lower the costs of goods purchased by Whole Foods as well as

reduce overhead by those partnered farms.

Summary of Operating Results

For the year ending December 31st 2009 2008 2007

In millions of dollars except per share amounts

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Sales 8,031,620 7,953,912 6,591,773

Cost of Goods Sold 5,277,310 5,247,207 4,295,170

Gross Profit 2,754,310 2,706,705 1,711,229

Comparable Store Sales -3.1% 4.9% 7.1%

Net Income 146,804 114,524 182,740

Net Working Capital 371,356 (43,571) (104,364)

Interest Expense (36,856) (36,416) (4,208)

Provision for Income Taxes 104,138 91,995 121,827

Earnings Per Share .85 .82 1.30

Dividends Declared Per Share .00 .60 .87

Net Income Per Share- Diluted .85 .82 1.29

Whole Foods financials show in 2009 that as a company they had a decline in store sales, paid

significant interest on long-term debt, had a high cost of goods sold and did not declare dividends for

that year. In addition, their gross profit grew slightly from 2008 to 2009, increased their provisions for

income taxes, and had a reduction in net income from 2007 but an increase from 2008 to 2009. In 2009,

Whole Foods sales growth was only .98%, gross income growth was only 1.76%, accounts turnover was

76 days, a PE ratio of 12.76, a debt to equity ratio of .49 and a current ratio of 1.35. These financials

show Whole Foods as having high debt, marginal profit and average turnover for the goods they sold in

their industry. Moreover, their gross income was hampered by high debt, their PE ratio is average, and

their debt ratio is above average and their debt to equity ratio shows in 2009 that they would not be

able to meet their debts with liquid assets.

SWOT Matrix:

SWOT

Strengths – S

Brand Recognition

Consumer good will

Employee empowerment

Weaknesses –W

High debt

High cost products

Slowing revenue

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Opportunities – O

Ethical labor and environmental

brand exposure

Strong team values

Lower store costs

SO Strategies

Increase marketing

Develop shopping incentives

Train team members for

management

WO Strategies

Pay off debt

Reduce new store openings and

close unprofitable stores

Expand low cost brands

Threats – T

Increased price on main ingredients

Competing Supermarkets organic

brands

High ratio of perishable products

ST Strategies

Expand in store Whole Foods

brands

Offer sales on basic foods

Increase organic foods that have a

higher shelf life

WT Strategies

Expand shopping experience to

partnering stores

Increase efficiency of food

distribution

Increase long term contracts with

farms at reduced expense

Whole Foods SWOT matrix shows that the company is burdened by debt and by the ability of

their competitors to out sell and out compete them. Whole Foods not only has to increase their same

store sales but also must increase the average amount of sales each customer purchases per visit. They

must reduce the cost to them in selling their products as well as increase low cost high quality brands.

This is something that other larger chain grocery markets can more easily accomplish because they can

purchase at a greater volume. Their competitors are also much more efficient at distributing their fresh

food products as opposed to Whole Foods. I believe the most important goal for Whole Foods in 2009

would be to pay off its long-term debt and then market their brand and products, of which they do little

of while training new managers for advance corporate roles.

Space Matrix:

Financial Position Ratings

Leverage 2

Working capital 2

Cash flow 3

7

Industry Position

Growth potential 2

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Profit potential 3

Financial stability 2

7

Stability Position

Price range of competing products -3

Competitive Pressure -4

Price elasticity of demand -3

-10

Competitive Position

Market Share -3

Product quality -1

Customer loyalty -2

-6

Conclusions:

FP Average = 7/3 = 2.3

IP Average = 7/3 = 2.3

SP Average = -10/3 = -3.33

CP Average = -6/3 = -2

Space Matrix Coordinates:

X-axis: CP+IP or (-2 + 2.3) = .3

Y-axis: FP+SP or (2.3 + -3.33) = -1.03

Space Matrix analysis:

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The Space Matrix show that Whole Foods is competing fairly well in a very unstable market. The

supermarket industry is comprise of aggressive large chain stores, warehouse stores, small chains, mom

and pop stores, open air markets, farmers markets, discount dollar type stores and even pharmacies and

food delivery companies. These companies compete with Whole Foods on a variety of levels, depending

on the store market niche, the size of the company and where it is located in relation to a Whole Foods

store. Whole Foods is competing fairly well, in that in order to assure its continued existence it needs to

just reduce its debt and slow its expansion. Other factors that will help it compete such as increasing

store brand products and increase its efficiency will have beneficial effects but they are not as critical to

the success of the company as debt reduction.

BCG Matrix:

High Medium Low

Medium Stars

Store brand

?’s

Low shelf live products

Low Cash Cows

Prepared foods

Dogs

High variety specialty brands

FP

6

5

4

3

2

1

CP IP

-6 -5 -4 -3 -2 -1 1 2 3 4 5 6

-1

-2

-3

-4

-5

-6

SP

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The BGC Matrix shows that Whole Foods store brands are doing well while high variety specialty

brands are not. For example, high variety specialty brands could be having twenty different varieties of

first press olive oil. These types of products take up a great deal of shelf space while producing little

revenue for the company. High cost prepared foods bring in a great deal of revenue for Whole Foods but

this is changing as the slow economy has altered customers food shopping patterns. Customers are more

likely to prepared foods at home than by already prepared foods at Supermarkets. This will affect their

cash cows and as such, they need to increase their store brands. Because of changing regulations, Whole

Foods organic foods may need to meet certifications that may cost more for Whole Foods and reduce

the profitability of those products for them.

Pro forma Statement:

Income Statement 2008 2010 Projected Comments

(in thousands unless specified)

Sales Revenue 7,956,912 8,500,000 Increased sales due to an expansion of store brands, reduction in specialty brands and increased efficiency in distribution. Lower costs of goods sold through better distribution and increase in store closures costs due to closing of revenue sinks

Cost of Goods Sold

5,247,207 4,500,000

Relocating and Store Closure Expenses 36,545

40,000

Operating Income 236,238 275,000

Increase in operating income due to closing of poorly operating stores and increase in same store purchases

Accounts Payable 181,134 175,000 Reduction of accounts payable do to better

turnover, reduction of long term debt through paying of principle and current liabilities as well

Long Term Debt

928,790 750,000

Current Liabilities 666,177 600,000

Number of Stores 275 265

An increase in the number of store closings offset by new store opening but with a decrease in projected store openings

Dividends per Share (dollar amount) - 1

Cash 30,534 40,000

Cash on hand increases due to SWOT implementation

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The above pro forma statement shows a portion of the Consolidated Statements of Operations and

Balance sheet affected by my recommendation and the external factors discussed in the Internal,

External and SWOT matrix. The above Pro Forma statement is comprised of actual 2008 data and

projected 2010 data.

Epilogue Section:

Since the case was written net sales have increased, to 10.11 billion dollars, sales growth has

increased to 12.24% and long-term debt has decreased to an amazing 17.44 million dollars. Total

liabilities have decreased to 1.3 billion dollars while total assets have increased by 7.66% to 4.29 billion

dollars. Whole Foods cash on hand has increased to 746 million dollars while gross income is 3.25 billion

up from 2.75 billion in 2009. Whole Foods net income has increased three years in a row from 148.6

million dollars in 2009 to 342.6 million dollars in 2011. However, capital expenditures have cost Whole

Foods increasing from 68.22 million dollars in 2009 to 370.12 million dollars in 2011. This capital

expenditures increase may be due to new store openings and the renovation of existing Whole Foods

stores. Whole Foods current PE ratio is 38.11 which is above average ranked 6 out of 37 while EPS

growth is currently 13.60% ranked 11 out of 37 in the industry. Unfortunately, long-term debt to equity is

still high at .557, which means they do not have enough liquid assets to meet their obligations should

they be required to do so in the future. The above financial data shows that since the case has been

written Whole Foods has made strides to increase revenue, reduce its debt and invest wisely. However,

capital expenditures still show Whole Foods has a capacity to spend money it does not have which is a

cause for concern.

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