I go to the Whole Foods (WFM) by my house all the time. I definitely don’t go there for the sales or the deals. I could care less about quinoa, pink Himalayan sea salt, or polenta. I go there because it’s the closest place to get dog food and the closest thing to a singles bar a grocery store could ever be. I usually come back with a bag of dog food, a bottle of rum, and a story to tell.
The store also known as “Whole Paycheck” has a bit of a reputation; High prices and weird organic food. So it really didn’t come as much of a surprise to me when their earnings missed last night and guidance was lowered. You mean I’m not the only one that doesn’t want to spend $6.99/lb. for ground beef? How much does that grass cost you’re feeding those things anyway?
We have seen grocers get beat up for some time now. Here in Chicago, Safeway (SWY) pulled mainstay Dominick’s out of the market altogether. Dominick’s was as Chicago as it gets. Its founder was gunned down by Al Capone’s henchmen for crying out loud. It’s worse than when Macy’s took Marshall Field’s away from us. Or when that Willis guy thought it was a good idea to erase Sears from our skyline. But I digress…
The entire industry is horrible right now ranking among the bottom 9% of all the 265 industries we rank. Whole Foods and Safeway have both been taken down to a Zacks Rank #4 (Sell) and should be taken off your radar. With all these losers in the industry, there has to be a winner somewhere. People haven’t just stopped grocery shopping.
Delhaize (DEG) one of two stocks in the retail supermarket industry that has a Zacks Rank #2 (Buy). The supermarket holding company has a diverse portfolio of store brands tailored to meet regional tastes and demands. Here in the US on the Eastern seaboard they operate Food Lion and Bottom Dollar Food. Maybe this could be the silver lining on our dark and dreary horizon.
I love a quick look at the price and consensus chart for every stock I evaluate. It can tell us a lot about why the Zacks Rank is what it is, in a nice, concise graphic that you can quickly glance at and gain an understanding from. Here DEG looks like a stock that had a tough time navigating 2011 and 2012 for whatever reason. Earnings revisions kept coming down lower and pulled the stock off its highs in the mid-$80s to lows in the $30 range. Recently the stock has rebounded as revisions rebounded as well. However we are still off the 2013 high and did find some support at $55. What bugs me a bit is the fact that last time earnings consensus was down where it is today, the stock was $20 lower. Well at least we know P/E has expanded since then.
The technical chart is decent. Early February gave us a pretty good buy signal around $62. There was a pull back to support, confirmation above the 25×5 SMA, and a stochastic cross from oversold territory. Being the big momentum guy I am I can’t really jump behind it though. It’s just too boring for me. The entire range on the chart is $54 to $72 and the stock sits around $65. A little more than 10% upside potential to the 2013 high in an industry that the analysts hate right now. I think I’ll pass. There are better risk/reward scenarios in better industries right now. That reminds me, Gracey needs some grub; I’m off to Whole Foods.
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