Do Organic Grocers Make Money?

All this makes Whole Foods a very suspect investment even though its stock has done well. WFM investors received a return on equity of 13.69% on December 31. The company is scheduled to pay a 14¢ a share dividend on April 5, 2017. One has to wonder how much longer that can continue. Sprouts pays no dividend but its’ investors did receive a 16.07% return on equity on December 31, 2016.

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Is Amazon Really a Threat to Grocers?

My take is that the major grocers; and high-end grocers like Whole Foods, will survive but many of the regional and discount chains will not. Instead of being a direct threat to grocers, Amazon will be an indirect threat taking some business and providing another headache for grocers.

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Can Sprouts Survive?

These figures indicate that Sprouts can run out of money at any time. That might mean it will have to start closing stores or simply sell the entire chain like Roundy’s and the Fresh Market did. Nor would it get that much for the entire operation, Ycharts reported that Sprouts had a Market capitalization of $3.072 billion and an enterprise value of $3.063 billion on September 19, 2016.

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Organics Generate a lot of Sales Growth, but no Cash or Income

Low margins and intense competition make both Whole Foods and Sprouts bad investments. Both of these chains will struggle to survive in a market filled with larger and far better capitalized rivals in the near future. My prediction is that either Whole Foods or Sprouts will enter the death spiral at some point before the year 2020.

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Can Whole Foods Market Avoid the Death Spiral?

More importantly, Kroger has reported 49 quarters of same store growth as of second quarter 2016. One has to wonder how Whole Foods is supposed to be able to compete with that.

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Sprouts: Can this Supermarket Survive?

Kroger is a threat to Sprouts because it too is a deep discounter. News reports indicate that Kroger can sell most groceries at prices 3% to 5% lower than the industry norm. It is also making an aggressive push into the organic and natural foods segment with Simple Truth, a private label brand that reached $1 billion in sales in 2014. Simple Truth sales have been growing at a rate of around 10% a quarter.

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Kroger takes Aim at Whole Foods with new Concept

Another possibility is that Kroger will take over select Fresh Market locations. Main & Vine could be the prototype for transforming those stores into something more successful. Whole Foods had better keep a close watch on Kroger; the nation’s largest grocer could soon be in a position to steal most of its business. Main & Vine proves that Kroger can successfully copy Whole Paycheck’s business model and do a better job of executing it.

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