Income Statement Analysis of Whole Food

Historical Financial Data Analysis:

Based on ten years historical financial performance (Exhibit 9), Whole Foods profits have continued to improve for the past ten years.

Whole Foods as a finer grocery store provides natural and organic grocery items, its cost of goods will always be a big portion of its operation. However, from the Exhibit 9, Whole Foods actually was gradually reducing its cost of goods sold while expanding its market. As the cost of goods sold was decreasing and sales increasing, Whole Foods net incomes have been increasing overall (except on 1996 and 2000 due to the interest expenses).

Comparable Data Analysis:

Net Sales: Wal-Mart’s net sales were the highest because of its various product choices and size, but Whole Foods’s sale is still ahead other organic store (Wild Oats) in 2005.

Percentage of sales: Based on Exhibit 10, Whole Foods has the lowest cost of goods sold over sale (61.75%) as we mentioned before. Also, it has the highest selling, general and administration expenses dues to the high maintenance costs of its products. The other organic food store, Wild Oats, has similar expenses. As for the net income over sales, Whole Foods is second only to Wal-Mart and way ahead to the rest.

Important Ratios Analysis:

Inventory Turnover Ratio: Whole Foods is most efficient in managing its inventories taking 17.71 times versus Wal-Mart’s 7.7 and Wild Oats’ 13.05 times. It shows Whole Foods is able to fulfill customers’ need on time and has less inventories sit in the warehouse compared to its competitors, especially considering the products it sells have a shorter shelf life.

Days to sell inventory: Whole Foods takes less time to sell off all of its inventories (taking 20.32 days versus Wal-Mart’s 47.07 and Wild Oats’ 27.58 days. It is mainly due to the Whole Foods’ products itself have a shorter shelf life.

Return on Equity (ROE): Kroger’s has the industry’s highest ROE; $4.39 billion in total shareholders’ equity for 3,700...