Balance sheet of "Safeway Foods" and "Whole Foods" - the U.S. market for organic groceries

Résumé du document

This report aims at performing a financial analysis of two American food providers: Safeway Foods and Whole Foods and assess the financial strengths and weaknesses of both companies. All the quantitative data in this analysis come from prior years annual reports. The American grocery market is made of general grocers like Wal-Mart or Kroger that offer low price goods and more specialized grocers like Whole Foods, focus on natural and organic food, more expensive of course. Moreover, the main competitors on the American market are Kroger, Safeway, Supervalu and organic grocers like Whole Foods or Trader Joe's. General grocers actually want to take advantage of the growing organic food market and are more and more present in this market, so that competition in the natural and organic market has increased, because 82% of general grocers now offer natural goods alternatives. Whole Foods is nowadays the world's leader in natural and organic foods, present in the United States and United Kingdom with 275 stores. The sustainable agriculture and the highest quality standard are the main key success factors of the company .

Extraits

[...] Thus, we will compare figures for both Whole Foods and Safeway. Besides, we are doing this financial analysis to make comparisons through standardized financial information in order to evaluate current operations and compare present and past performance. It will enable us to study the efficiency of operations and their intrinsic risks. Horizontal analysis Whole Foods This table shows us that sales in 2009 were almost equivalent compared to 2008. However, we can see that the net income were 1.3 times greater than sales in 2008. [...]

[...] Philosophy of whole foods Whole Foods Market was created in 1980 in Austin, Texas and was the bottom line of a natural food's expansion. The first store was opened the same year with only 19 employees but the success was absolutely amazing. Afterwards, the company bought through mergers and acquisitions several natural food companies in all states of the United States[3]. Whole Foods is nowadays the world's leader in natural and organic foods, present in the United States and United Kingdom with 275 stores. [...]

[...] In 2008, Bright Green, a line of home care products dedicated to be safe and environmentally friendly. Besides, Safeway bases its buying process on experiencing its ‘lifestyle' stores[11]. As Whole Foods, Safeway faces risks and uncertainties in the grocery business. Indeed, the tough competition could impact profitability. As profit margins are very narrow in the grocery retail industry, Safeway tries to improve productivity or reduce costs. The indebtedness of the company can be also a risk factor and lead to a financial health vulnerability. [...]

[...] Whole Foods's EPS went up in 2009 against 2008. Besides, we can see the same trend for Safeway with a consequent increase of its EPD. Thus, Safeway is more profitable than Whole Foods on this point. Market Indicators for Whole Foods The following ratios are related to the current market price of stock to earnings or dividends. Price Earnings Ratio = Market Price Per Common Share / EPS Whole Foods Safeway Whole Foods lowered its PER in 2009 compared to 2008 and the same for Safeway. [...]

[...] As this ratio is higher for Safeway than Whole Foods, it is a riskier company. Cash Debt Coverage Ratio = Cash Provided by Operations / Average Total Liabilities Whole Foods Safeway This ratio indicates the ability to pay long-term debt and shows the percent of debt that current cash flow can retire. We can see that Whole Foods increased a lot this ratio, whereas Safeway remains quite stable. Thus, the trend is better for Whole Foods. Times Interest Earned Ratio = Net Income Before Interest / Interest Expense Whole Foods Safeway This ratio indicates company's ability to meet interest payments as they come due. [...]