This report aims at performing a financial analysis of two American food providers: Safeway Foods and Whole Foods and assess the financial strengths and weaknesses of both companies. All the quantitative data in this analysis come from prior years annual reports. The American grocery market is made of general grocers like Wal-Mart or Kroger that offer low price goods and more specialized grocers like Whole Foods, focus on natural and organic food, more expensive of course. Moreover, the main competitors on the American market are Kroger, Safeway, Supervalu and organic grocers like Whole Foods or Trader Joe's. General grocers actually want to take advantage of the growing organic food market and are more and more present in this market, so that competition in the natural and organic market has increased, because 82% of general grocers now offer natural goods alternatives. Whole Foods is nowadays the world's leader in natural and organic foods, present in the United States and United Kingdom with 275 stores. The sustainable agriculture and the highest quality standard are the main key success factors of the company .
[...] Thus, we can see that, the dividend yield ratio of Whole Foods is higher but Safeway improved it from to showing a good trend. Therefore, if we are strictly looking at the performance, Whole Foods remains better than Safeway. Du pont system The Du Pont System emphasizes the necessity for a business to earn the highest return on equity (ROE) as possible. The calculation of the ROE is known as: ROE = Net Income / Common Equity. The Du Pont System focuses on value drivers which actually drive ROE as the profit margin, the total asset turnover and the equity multiplier. [...]
[...] And we will finish with the DuPont System analysis. By the way, these ratios measure the relationship between resources and financial flows and show ways in which firm's situation deviates from its own past, other firms or the linked industry. In making the comparison between Whole Foods and Safeway, The best position will be highlighted in green and the worst in red for each ratio. Liquidity ratios for Whole Foods and Safeway The following ratios measure the ability to pay current bills and operating costs. [...]
[...] Finally, we will see the relative reasons of success for Safeway and Whole Foods. The American grocery market The American grocery market is made of general grocers like Wal-Mart or Kroger that offer low price goods and more specialized grocers like Whole Foods, focused on natural and organic food, that are expensive than the general grocers[1]. According to http://www.ats- sea.agr.gc.ca/amr/3948_e.htm, in 2007, the domestic grocery sales reached over US$ 963.9 billion and are forecasted to reach over US$ 1.1 trillion by 2012. [...]
[...] In comparison to 2008 Whole Foods has improved and so did Safeway but in a smaller measure. Still, Safeway gets the highest value that suggests a more favorable return on the sale of each dollar. Earnings Per Share = (Net Income – Preferred Dividends) / Weighted Average # of Shares of Common Stock Outstanding Whole Foods EPS 2009 EPS 2008 (146,804-28,050) / 139,710 = 0.85 114,525 / 139,886 = 0.82 Safeway EPS 2008 EPS 2007 965,300 / 436,787 = 2.21 114,525 / 57,550 = 1.99 This ratio calculates the net income per share of common stock. [...]
[...] As purchasing power decreased, consumers were attracted by cheaper products and got more to discounters than grocery stores. However, consumers had a trend to eat less in restaurants and prefered to shop in grocery stores. This is an important factor of stability of the food industry. Both the companies were present in the natural and organic food market and this industry had experienced a constant growth for several years. Compared to 2006, in 2007, the worldwide sales of natural products reached $62 billion with a 10% increase. [...]
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