Is Growth at Whole Foods Market, Inc. (WFM) Worth the Price?

One area where Whole Foods Market, Inc. (NASDAQ:WFM) could see huge promise is in the rise of private-label brands. In the conventional food space, ConAgra Foods, Inc. (NYSE:CAG)‘s buyout of Ralcorp Holdings, which closed in late January, upped the ante for private-label sales. Brand-name food producers like Kellogg Company (NYSE:K) and General Mills, Inc. (NYSE:GIS) now find themselves on the defensive against lower-priced alternatives that compete well not only on price but also on quality. Yet Whole Foods has taken advantage of the trend to come out with its own private-label offerings, which have the potential to boost its margins even further.

But Whole Foods needs to reassure investors that its disappointing guidance from its quarterly report in February won’t hold the company back. The drive to increase its lower-priced offerings to consumers reflects a desire to appeal to a broader base of customers and to get rid of its “Whole Paycheck” reputation. Although that may restrain earnings growth in the short run, it won’t stop the company from continuing expansion plans for more stores.

When Whole Foods Market, Inc. (NASDAQ:WFM) reports, its emphasis should be on supporting the long-term vision for the grocery chain going forward. With competitors trying to learn lessons from its stellar results, Whole Foods will have to keep innovating to retain its leadership role in the industry and justify the high multiple that shareholders are paying for the stock.

The article Is Growth at Whole Foods Worth the Price? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Costco Wholesale (NASDAQ:COST) and Whole Foods Market and owns shares of Costco Wholesale and Whole Foods Market.

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