Seven Core Growth Stocks for Your Portfolio – Whole Foods Market, Inc. (WFM)

Big box retailers are moving into the space. In June, Wal-Mart Stores, Inc. (NYSE:WMT) introduced its new fresh produce project. The initiative plans to purchase fruits and vegetables directly from growers under the guidance of the company’s produce experts. Wal-Mart plans to roll the project out to 3,400 locations with weekly quality checks and regular staff training programs.

Don’t dismiss a company with a $250 billion market capitalization and the economies of scale that brings. But, while Wal-Mart will likely be successful with this initiative, it’s a bigger threat to traditional grocers, like Safeway Inc. (NYSE:SWY) and The Kroger Co. (NYSE:KR), who are competing for the same customers.

In contrast, investors should be more worried about the competition that’s developing within Whole Foods’ niche. Over the past few years, we’ve seen a rash of industry IPOs including Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) and Fairway Group Holdings Corp (NASDAQ:FWM).

The Fresh Market Inc (NASDAQ:TFM) is the largest of these competitors and the company has posted impressive results since its IPO in 2010. Last quarter’s revenue and operating income increased 20% and 21.7%, respectively. The company also reported an impressive 5.7% jump in same store sales.

With management planing to open 500 stores nationwide, it’s only a matter of time before the company starts infringing on Whole Foods’ territory. While Whole Foods has the scale to deal with these threats, it will come at the expense of profit margins.

Foolish bottom line

Whole Foods Market, Inc. (NASDAQ:WFM) is a company that combines exceptional growth with exceptional pricing power. That’s why, it should be a core position in your portfolio.

The article 7 Core Growth Stocks for Your Portfolio – Whole Foods originally appeared on Fool.com and is written by Robert Baillieul.

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