Market Overview

Whole Foods '365' Spinoff Stores Are Being Carefully Positioned Near Trader Joe's And Sprouts

Share:

Last week, Whole Foods Market, Inc. (NASDAQ: WFM) announced a spinoff store called 365, with the first location set to open May 25.

The new grocer's concept has been described as a practical way for Whole Foods to "improve the chain's overall competitiveness and value positioning," Oppenheimer explained.

"We believe the new concept could be a way to capture share in markets that are too small for a legacy Whole Foods Market store and to gain new value-oriented customers in existing markets," Oppenheimer analysts Rupesh Parikh and Erica Eiler said.

Competition And Location Overlap

Parikh and Eiler delved into the key details of 365, and addressed the mapping plans for the 365 locations.

While the analysts noted a few of the proposed 365 locations will overlap Whole Foods' locations, the most notable overlap is between 365 and Trader Joe's and Sprouts Farmers Market Inc (NASDAQ: SFM).

Related Link: Trader Joe's Might Be Once Again Catching Whole Foods Off Guard With Price Investments

"Based on our mapping work, we found four 365 stores have a competing WFM location within five miles," the analysts stated. "Out of the first 13 stores, ten are located within five miles of Trader Joe's, seven within five miles of SFM, and six within five miles of a KR (The Kroger Co (NYSE: KR)) store. We also found it noteworthy that six 365 stores are located within one mile of a Trader Joe's."

The analysts explained that while the proximity with competitor names could lead to upside for Whole Foods, they are concerned with the locations overlapping the market of original Whole Foods locations. "In our investor conversations, sentiment remains quite negative toward the potential success of this concept, with cannibalization representing a key concern," Parikh and Eiler elaborated.

What It Means For Whole Foods

For the longer term, the analysts view Whole Foods as "appropriate," saying, "Comps stabilization is key for the shares and we don't believe trends have stabilized to date. Our current forecasts build in further comp deterioration on a two-year stacked basis in Q3. We believe the shares are likely to remain range-bound in the high $20's to low $30's."

Oppenheimer rates Whole Foods at Outperform, with an attached 12–18 month price target of $38.00.

Latest Ratings for WFM

DateFirmActionFromTo
Aug 2017BarclaysDowngradesOverweightEqual-Weight
Aug 2017Tigress FinancialDowngradesBuyNeutral
Jul 2017Wells FargoDowngradesOutperformMarket Perform

View More Analyst Ratings for WFM
View the Latest Analyst Ratings

 

Related Articles (WFM + SFM)

View Comments and Join the Discussion!

Posted-In: 365 365 by Whole Foods Erica Eiler GrocersAnalyst Color Reiteration Analyst Ratings Trading Ideas

Latest Ratings

StockFirmActionPT
URIVertical ResearchInitiates Coverage On310.0
PCARVertical ResearchInitiates Coverage On95.0
DEVertical ResearchInitiates Coverage On345.0
CNHIVertical ResearchInitiates Coverage On16.0
AGCOVertical ResearchInitiates Coverage On119.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com