Paper Example on Whole Foods Market: Charting an Optimistic Course in Grocery Industry

Whole Foods Market has an optimistic strategy of increasing its sales and becoming the leading retailer in the grocery industry. The sales for the company have been on the increase since 2009, and it is forecasted for the sales to increase beyond 2015.

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2) Prepare a competitor analysis. How would you define Whole Foods' industry? Who are Whole Foods' competitors?

Whole Foods Market faces stiff competition in the industry from other top grocery retailers in North America, such as Wal-Mart, Kroger, and Costco. The entrance of other natural & organic foods retailers into the market has impacted Whole Foods Market's sales, and which is likely to hinder its performance due to reduced market share. The major competitors to Whole Foods Market are those under the natural and organic category, including Sprouts and Fresh Market, Conventional grocers such as Kroger, Safeway, and SuperValu and supercentres and wholesalers such as Wal-Mart and Costco.

3) How attractive is Whole Foods' current market position? Is it sustainable?

According to the information, the current market position for Whole Foods Market is average when compared to other players in the market. The sales have been increasing since 2009 and are also forecasted to increase in 2014 through 2015, as compared to the period between 2005 and 2009. The market performance of Whole Foods Market is, however, underperforming when compared to other firms in the industry such as conventional grocers, supercentres, and wholesalers. The market position is yet sustainable, given the fact that the sales have been increasing since 2009 despite the stiff competition.

4)What do the financial ratios in Exhibit 4 tell you about the past operating performance of Whole Foods? How informative are the historical ratios for Whole Foods' prospective performance?

Whole Foods Market experienced negative sales growth between 2004 and 2007. The sales increased by 21% in 2008, which was the second-highest after the 23% sales increase in 2004. The sales, however, fell to a record low of 1% in 2009 before increasing by 12% in 2010 and 2011, 16% in 2012 and falling to 10% in 2013. Since 2008, the average EBITDA margins have continuously increased to a joint high of 9% as in 2004. The historical ratios reveal the operations performance of the firm over the period time, showing where the firm performed poorly and where it performed well and the measures that it can take to improve performance in the future.

5) Examine Exhibit 7 in detail. How important are each of the underlying financial assumptions in the ROA forecast? What assumptions (i.e., margins, asset turnover, growth) play the biggest role in driving the anticipated improvements in ROA?

The underlying financial assumptions in the ROA forecast shows the expected increase or decrease in relation to the preceding figures. The assumptions are that the market conditions will remain the same and that the firm will maintain its business operations only regulated by market conditions. The sales, sales growth, net income, and EBITDA margin play the biggest role in driving the anticipated improvements in ROA.

6) Do you agree with the existing financial assumptions in the Deutsche Bank forecast? If so, why? If not, what adjustments would you make to the model? Be prepared to defend the basis of your forecast for Whole Foods' performance.

The existing financial assumptions in the Deutsche Bank forecast are not entirely accurate as there are many factors that affect the performance of a firm. Therefore, the assumptions may hold if the market conditions remain the same. This is, however, difficult due to factors such as competition, change of government policies, and change in consumer preferences. Due to new market entrants that had entered the market before and decreased the market share for Whole Foods' Market, I will not have increased the projected sales aggressively as in the report, since it will give shareholders a false impression that the firm is guaranteed to succeed in the future, which may not be the case, as when the company does not fulfill the expectations, its share prices will fall thus drive away investors.