In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
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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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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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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Kroger is far more than just a grocer; it now operates 326 jewelry stores, 1,330 supermarket fuel centers, and 782 convenience stores. Some of its supermarkets now contain cafes, sushi bars, coffee shops, and even gourmet cheese stores. Many of its marketplaces offer clothing, appliances, electronics, furniture and hardware, in addition to groceries. All this gives Kroger a wide variety of streams of revenue. It has helped the company avoid the downturn in traditional grocery sales. One advantage to diversification is that it gives customers a wide variety of reasons to step into a Kroger store.
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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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This shows a very sophisticated grasp of ecommerce on Kroger’s part. It also demonstrates how this chain has become America’s biggest grocer and will probably stay that way for the foreseeable future.
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