Deutsche Breurie

My Take

To understand why I'm bullish on Whole Foods -- even while the company's latest quarterly report showed a 13% slide in profit, missing Wall Street estimates -- let's examine how the company makes money and how well it's accomplishing its mission, or "Declaration of Interdependence," as it boasts on its Website.

Let's also peek into management, because to be honest, I was a tad concerned after the brouhaha surrounding CEO John Mackey, who was recently cleared by the SEC for sending about 1,400 anonymous Yahoo! (YHOO - Cramer's Take - Stockpickr) postings about Whole Foods' prowess under the screen name "Rahodeb" -- his wife's name spelled backwards. Tricky!

Whole Foods makes money primarily from high margin sales of organic varietals in a booming organic food market in the U.S. This industry is expected to grow $3.5 billion a year and top $30 billion in 2009, according to the Organic Trade Association, with Whole Foods its eminent poster child. Credit Suisse (CS - Cramer's Take - Stockpickr) analyst Edward Kelly writes in his latest report on Whole Foods that "the industry will grow at least in the high single digits for the foreseeable future."

Whole Foods' mission statement, entitled "Whole Foods, Whole People, Whole Planet," promises to provide more than just food. "Our success in fulfilling our vision is measured by customer satisfaction, Team Member excellence and happiness, return on capital investment, improvement in the state of the environment, and local and larger community support," says its Website.

In question right now is Whole Foods' return on capital investment. Its less-than-great acquisition of Wild Oats attributed to a loss of $8.6 million in the second quarter, according to the company's latest earnings filings. Further, its ramp up in store openings -- up to 30 more in 2009 -- has some downside risk and could potentially hurt the stock in the near-term, analysts worry. Credit Suisse, for example, projects Whole Foods'...