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Whole-Foods Market, Inc. - 2009Case Notes Prepared by: Dr. Mernosh !anton

Case "thors: #a$es %. &arb'n and Patr'c'a &$phrey

A. Case Abstract

Whole-Foods Market, Inc. ())).)hole*oods.co$+ 's a co$prehens'e bs'ness pol'cyand strate'c $anae$ent case that 'ncldes the co$panys F'scal year-end/epte$ber, 200 *'nanc'al state$ents, co$pet'tor 'n*or$at'on and $ore. 1he case t'$esett'n 's the year 2009. /**'c'ent 'nternal and eternal data are pro'ded to enablestdents to ealate crrent strate'es and reco$$end a three-year strate'c plan *orthe co$pany. &ead3artered 'n "st'n, 1eas, Whole-Foods Market, Inc. 's traded onthe Ne) 4ork /tock 5chane nder t'cker sy$bol WFMI.

B. Vision Statement ("ctal+

6r 's'on 's all abot health and oran'c prodcts that reaches *ar beyond 7st *oodreta'l'n.

C. Mission Statement ("ctal+

6r Co$pany $'ss'on 's to pro$ote the 'tal'ty and )ell-be'n o* all 'nd''dals byspply'n the h'hest 3al'ty, $ost )holeso$e *oods aa'lable (8, 2, +. /'nce the pr'tyo* or *ood and the health o* or bod'es are d'rectly related to the pr'ty and health o* oren'ron$ent, or core $'ss'on 's deoted to the pro$ot'on o* oran'cally ro)n *oods,*ood sa*ety concerns, and the ssta'nab'l'ty o* or ent're ecosyste$ (, +. 1hroh orro)th, )e hae had a s'n'*'cant and pos't'e '$pact on the natral and oran'c *oods$oe$ent throhot the ;n'ted /tates, help'n lead the 'ndstry to nat'on)'deacceptance oer the last 2 years (

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$oe$ent throhot the ;n'ted /tates, help'n lead the 'ndstry to nat'on)'deacceptance oer the last 2 years ( 0.>0

Manae$ent 0.0> 2 0.0 8 0.0> < 0.82

F'nanc'al Pos't'on 0.80 2 0.20 < 0. 0.>0

Csto$er %oyalty 0.80 > 0.>0 2 0.20 < 0. 0. 0. 8 0.0

Blobal 5pans'on 0.0= 8 0.0= 2 0.80 > 0.20

'otal (.)) *.*+ *.)+ ,.*-

pportunities8. Brocery stores are ranked a$on the larest 'ndstry 'n the ;n'ted /tates2. 6*ten re3'res lo) )aes and part t'$e e$ployees. 5pected Increase 'n reta'l sales a$on lo) pr'ced stores=. Pr'ate %abel brand 's ro)'n rap'dly as a sbst'tte to pre$'$ brands. &'h entry barr'ers *or a co$pany to open too $any stores 3'ckly. Cons$ers are $o'n to a $ore healthy eat'n hab'ts. Weak econo$y cases cons$ers to ct back 'n eat'n ot and spend'n $ore

$oney by shopp'n to cook at ho$e

'reats

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8. Not ery pro*'table per 'te$ sold, o*ten only a penny on eery dollar sold2. Weak econo$'c cond't'ons cas'n cons$ers to ct back, $any by'n ener'c

brands. Increase 'n *el cost cold '$pact the prchas'n po)er o* the cons$ers=. Increase 'n *el cost cold case sppl'ers to ra'se the'r pr'ces

. Conen'ence stores are o**er'n $ore brands and 'te$s *or '$plse shoppers. Co$pet't'on 's stron a$on rocery store cha'ns

External !actor Evaluation /E!E0 Matrix

#e1 External !actors Wei$t &atin$ Wei$Scor

pportunities

8. Brocery stores are ranked a$on the larest 'ndstry 'n the;n'ted /tates

0.0 8 0.0

2. 6*ten re3'res lo) )aes and part t'$e e$ployees0.0 < 0.2>

. 5pected Increase 'n reta'l sales a$on lo) pr'ced stores

0.0 2 0.8

=. Pr'ate %abel brand 's ro)'n rap'dly as a sbst'tte topre$'$ brands

0.09 2 0.8

. &'h entry barr'ers *or a co$pany to open too $any stores3'ckly

0.0= 8 0.0=

. Cons$ers are $o'n to a $ore healthy eat'n hab'ts

0.09 > 0.

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. Conen'ence stores are o**er'n $ore brands and 'te$s *or'$plse shoppers

0.0> 8 0.0>

. Co$pet't'on 's stron a$on rocery store cha'ns

0.0> 2 0.0

'otal (.)) *.,*

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Positionin$ Map

E. 2nternal Audit

Stren$ts8. Cert'*'ed to sell oran'c *ood 'n eery depart$ent2. 5pected to hae 82 b'll'on 'n sales by 2080

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8. "s o* 200, only 2> stores 'n the ;/, 'n Canada and = 'n ;n'ted'ndo$

2. 1he co$pany has ct back on ro)th by open'n less stores *or thenet *or and hal* years

. 1he'r h'h-end '$ae and reptat'on $ay case so$e csto$ers tos)'tch to co$pet'tors stores

=. 6nly 2= percent o* Whole Food shoppers pro'de = percent o* totalsales

. 1he co$pany only spends 0.= percent o* the'r total sales onadert's'n and $arket'n

. Crrent asset )as redced by >= $'ll'on dollars *ro$ 200 to 200. Neat'e cash *lo) 'n 200 de to crrent l'ab'l'ty be'n h'her than

crrent asset by appro'$ately >> $'ll'on

!inancial &atio Anal1sis (6ctober 2009+

3ro4t &ates 5Wole

!ood2ndustr1 S6P +))

/ales (Atr s year ao 3tr+ 2.

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=4r Net Pro*'t Mar'n (=-4ear ".+ 2.> .28 28.=

"dapted *ro$ ))).$oneycentral.$sn.co$

Av$ P7E Price7 Sales Price7 Boo"8et Profit

Mar$in /50

09@09 20.>0 0.=0 8.9 8.=

09@0 >0.20 0.

09@0 . 2.

09@0 >.0 8.=< =.9 =.=

09@0< .22 .> 8.

Boo" Value7

Sare

Debt7

E9uit1

&eturn on

E9uit1 /50

&eturn on

Assets /50

2nterest

Covera$e

09@09 8>.=< 0. 0.=2 82.= =. 0.

09@0 80.0 0.08 8>.= 80.0 999.0

09@0= 80.0= 0.08 80.0 .2 80 .8 0.8 8

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2nternal !actor Evaluation /2!E0 Matrix

#e1 2nternal !actors Wei$t &atin$ Wei$Scor

Stren$ts

8. Cert'*'ed to sell oran'c *ood 'n eery depart$ent 0.0 > 0.. /o$e stores )ere b'lt 'n lo)-'nco$e areas, $ak'n the$ tobe $ore co$pet't'e )'th other establ'shed and lo)er costco$pet'tors

0.0> < 0.82

=. 1he co$pany has '$ple$ented a str'nent cost control andredct'on 'n cap'tal epend'tre

0.0 < 0.8

. Ba'ned add't'onal $arket share )hen ac3'red W'ld 6atsMarket Inc., one o* the'r stronest co$pet'tor 'n 200

0.0< < 0.09

. &ea'ly 'noled 'n en'ron$ental 'sses and co$$n'ty'nole$ent

0.0< < 0.09

. " )'de breadth o* prodct l'nes 's o**ered 'n each store 0.0 > 0.

2. 1he co$pany has ct back on ro)th by open'n less stores*or the net *or and hal* years

0.0> 2 0.0

. 1he'r h'h-end '$ae and reptat'on $ay case so$ecsto$ers to s)'tch to co$pet'torGs stores

0.0 8 0.0

=. 6nly 2= percent o* Whole Food shoppers pro'de = percent o*total sales

0.09 8 0.09

. 1he co$pany only spends 0.= percent o* the'r total sales onadert's'n and $arket'n

0.0 8 0.0

. Crrent asset )as redced by >= $'ll'on dollars *ro$ 200 to200

0.0 8 0.0

. Neat'e cash *lo) 'n 200 de to crrent l'ab'l'ty be'n h'herthan crrent asset by appro'$ately >> $'ll'on

0.0 8 0.0

'otal (.)) *.*+

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!. SW' Strate$ies

Stren$ts Wea"nesses

8. Cert'*'ed to sell oran'c

*ood 'n eerydepart$ent

2. 5pected to hae 82b'll'on 'n sales by 2080

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8. Brocery stores are rankeda$on the larest 'ndstry'n the ;n'ted /tates

2. 6*ten re3'res lo) )aesand part t'$e e$ployees

. 5pected Increase 'n reta'lsales a$on lo) pr'cedstores

=. Pr'ate %abel brand 'sro)'n rap'dly as asbst'tte to pre$'$brands

. &'h entry barr'ers *or aco$pany to open too

$any stores 3'ckly. Cons$ers are $o'n to

a $ore healthy eat'nhab'ts

. Weak econo$y casescons$ers to ct back 'neat'n ot and spend'n$ore $oney by shopp'nto cook at ho$e

8. Eedce the )'de breadtho* prodct l'nes by s'nthe$ 'n 'n-store ser'cessch as ready-t-eat $eals,salad bar, and otherprodcts. (/, 6

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shoppers. Co$pet't'on 's stron

a$on rocery storecha'ns

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3. SPACE Matrix

!inancial Stabilit1 /!S0 Environmental Stabilit1 /ES0

Eetrn on Inest$ent > ;ne$ploy$ent ->

%eerae 2 1echnolo'cal Chanes -2

%'3'd'ty 8 Pr'ce 5last'c'ty o* De$and -

Cash Flo) < !arr'ers to 5ntry -8

!inancial Stabilit1 /!S0 Avera$e *.* Environmental Stabilit1 /ES0 Avera$e %*.:

Competitive Stabilit1 /CS0 2ndustr1 Stabilit1 /2S0Market /hare -< Bro)th Potent'al 2Prodct Aal'ty -8 F'nanc'al /tab'l'ty

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F/

C/

5/

I/=>

=

-2--=- -8-

-

-

-=

->

-

>. 5pected Increase 'n reta'l sales a$on lo) pr'cedstores

0.0 < 0.2> > 0. 0. 0. 2 0.0 < 0.82

=. 1he co$pany has '$ple$ented a str'nent costcontrol and redct'on 'n cap'tal epend'tre

0.0 --- --- --- ---

. Ba'ned add't'onal $arket share )hen ac3'redW'ld 6ats Market Inc., one o* the'r stronest

co$pet'tor 'n 200

0.0< --- --- --- ---

. &ea'ly 'noled 'n en'ron$ental 'sses andco$$n'ty 'nole$ent

0.0< --- --- --- ---

. " )'de breadth o* prodct l'nes 's o**ered 'n eachstore

0.0 8 0.0 > 0.

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8. "s o* 200, only 2> stores 'n the ;/, 'n Canadaand = 'n ;n'ted 'ndo$

0.0 --- --- --- ---

2. 1he co$pany has ct back on ro)th by open'nless stores *or the net *or and hal* years

0.0> --- --- --- ---

. 1he'r h'h-end '$ae and reptat'on $ay caseso$e csto$ers to s)'tch to co$pet'torGs stores

0.0 2 0.8> > 0.2

=. 6nly 2= percent o* Whole Food shoppers pro'de= percent o* total sales

0.09 2 0.8 > 0. 0.2>

. Crrent asset )as redced by >= $'ll'on dollars*ro$ 200 to 200

0.0 > 0.> $'ll'on

0.0 > 0.2 8 0.0

SB''A (.)) (.++ *.)*

SM ''A A''&AC'2VE8ESS SC&E ,.;-

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Percent DebtPercentStoc"

Recession Normal Boom Recession Normal Boom

5!I1 20,000 >,>0,000 8,820,000 8,820,000 8,820,000

5!1 2

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Wh'le the co$pany cont'nes to earn accolades (they )ere only 8 o*