In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
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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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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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 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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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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