Whole Foods = Starbucks

5/14 - "Whole Foods (WFMI) released results and profit fell 13%, again proving like Starbucks' (SBUX) results, consumers will go for the less expensive option for like items...While the company backed its same store sales number of 7.5% to 9.5%, given results to date, one has to think that will turn out to be just way too optimistic.

Like Starbucks, Whole Foods is being hit by a slowing economy and increased competition. Both, unfortunately, are not reacting to it and actually seem to be denying the effect of competitors, preferring instead to focus on macro conditions...The problem with that is growth for both slowed before macro conditions deteriorated. One can only assume that it was because customers we able to find organic meat, eggs and juices at their local markets and rather than make the trip to pay premium prices, choose "the same for less"."

"Here is the good news for investors. Unlike Starbucks, Whole Foods seems to be far more forthcoming with investors, even if one could argue with their conclusions. Also, they do have a far more diverse product mix that is not as easily copied like Starbucks.

Are shares a buy now? Not yet. Even now shares still trade at 24 times current years earnings that are falling. If you think the economy will be stagnant for a while (I do) then that number will have to fall, much farther. Another bad quarter ought to lead to full year downward revisions and another buzz cut to the share price. I can envision this thing dropping to a mid teen PE which means a high teen share price.

Then, and only then does it get interesting"