Deutsche Bank Observes Interesting Trend For Whole Foods, Gives Upside Catalysts

Deutsche Bank issued a company update on Whole Foods Market, Inc. WFM after the supermarket chain reported that SKUs per store increased while inventory per store declined. Deutsche Bank rates Whole foods as a Hold with a $54 price target. Analysts Karen Short and Ryan Gilligan wrote, "It seems highly unlikely SKUs/store could have increased 52 percent with no impact on inventory; however the increase is dramatic... our best guess is inventory management improved, and/or there was a definition or methodology change (e.g., timing of the count)." The increase in average SKU count is not because more product categories were included in the disclosure. Merchandise inventory per store was down 3.1 percent to $1.11 million in 2014, which is impressive given food retail price inflation. The analysts cite an acceleration in comp due to share gains or the improving macro environment and better-than-expected cost savings that can fund price investments as current upside catalysts for Whole Foods. Shares of Whole Foods recently traded at $52.03, up 0.2 percent.