SUPERVALU INC. (SVU), Safeway Inc. (SWY) – Supermarkets: A Super Market?

Whole Foods Market, Inc. (NASDAQ:WFM)

Whole Foods Market, Inc. (NASDAQ:WFM) started out as a large health food store. In the years since, the company has transformed into the juggernaut of the supermarket industry. It is achieving margins of 6.4% and in-store growth of 8.4%. Unlike traditional grocery stores, the natural food industry has much potential for growth and Whole Foods Market, Inc. (NASDAQ:WFM) is taking advantage of that. The company intends to grow from 350 stores to 1000 in the next ten years (Supermarket News). The beginning of its Annual Report is essentially a brag sheet. It is expanding both within its own markets and into new markets. The company’s debt was rated investment-grade again, and it also raised its dividend.  Furthermore, it also has a strong online presence and we can clearly see the strong growth that the store has achieved over the last few years. Although it is not one of the leading supermarkets today by number of stores, it likely will be soon. Whole Foods Market even continues to be one of the best companies to work for. It has managed to achieve a number of successes over the past couple of years, and there is no reason to not expect this growth to continue. The one main caveat is that its success has been well recognized, and so much of its potential is already priced into the stock: its price-to-earnings ratio is 37.82, substantially higher than the market as a whole.

Supermarkets: a super market?

The supermarket has not been an exciting place to be recently with the exception of star performer Whole Foods Market. That will likely change in the upcoming years, however. SUPERVALU INC. (NYSE:SVU) has been faltering recently is searching for a new direction. The Kroger Co. (NYSE:KR) also searches for a new direction, but has been doing better recently. It may well be best to adopt a wait-and-see approach with respect to these two in the upcoming years. Safeway Inc. (NYSE:SWY), on the other hand, had a successful year last year and will likely be able to keep that up, and even if it does not it gives out a nice dividend. Whole Foods Market has also been doing well, but it successes are already reflected in its price.

The article Supermarkets: A Super Market? originally appeared on Fool.com and is written by Paul Sangrey.

Paul Sangrey has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market. The Motley Fool owns shares of Supervalu and Whole Foods Market. Paul is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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