Class warfare and the politics of food

Assessing the strength of the American consumer has become something of a national past time, especially during an election year. And as conflicting data points paint a picture of a lumpy economic recovery both presidential candidates can find something in retailers’ sales results that lend credence to their arguments.

Walmart is thought to be performing well, at least that is the expectation of those who have bid the company’s share price up to a new 52-week high. Score one for the Mitt Romney camp. It could be argued that Walmart’s resurgence is due in part to economic weakness caused by the failed policies of President Barack Obama. If the economy were better and more people had jobs, they wouldn’t be so dependent on Walmart’s low prices to get by paycheck to paycheck.

What then to make of the situation at Whole Foods this week where the company reported exceptionally strong results. Team Obama can make the case that affluent Americans are doing just fine as evidenced by Whole Food’s 8.2% same-stores sales increased for the third quarter ended July 1, and therefore they an afford to pay more in taxes.

Walmart’s perspective on the state of the lower end consumer won’t be available for a few more weeks, but for now Whole Foods results aren’t helping Romney’s camp make the case that Americans are struggling.

The nation’s leading purveyor of healthy foods surprised analysts, again, late Wednesday when it powered through their estimates and the company’s own guidance. In addition to the 8.2% comps increase, total sales increased 14% to $2.7 billion, net income increased 32% to $117 million and earnings per share that rose 27% to 63 cents were two cents better than analysts forecast. It was the fifth consecutive quarter in which same-store sales exceeded 8% and the 16th consecutive quarter in which he company’s earnings have exceeded analysts’ consensus estimate.

“In an economic environment that is proving to be difficult for many retailers, we are thriving and pleased to report another quarter of strong growth and excellent results for our stakeholders,” said Walter Robb, co-CEO of Whole Foods. “Our accelerated growth plans are on track, and we believe we will continue to gain market share through further differentiating our shopping experience, improving our relative value positioning, and reinforcing our position as America's healthiest grocery store.”

Based on its third quarter strength and comps that are up 9.7% during the first three weeks of the company’s fourth quarter, Whole Foods increased its full year earnings per share forecast by five to seven cents to a range of $2.51 to $2.52. The company also went so far as to forecast earnings and same-store sale for the coming fiscal year, despite uncertainty around food and commodity costs in the wake of a severe drought in the Midwest and energy prices which could prove volatile in 2013. Nevertheless, Whole Foods said it expects earnings for its new fiscal year beginning in November to range from $2.83 to $2.87 and comps to increase from 6.5% to 8.5%.

Whole Foods also plan to increase new store openings with between 28 and 32 stores in the works. The company ended the third quarter with a total of 329 stores in the United States, Canada and the United Kingdom. A record nine new locations opened during the quarter with six more planned for the fourth quarter it will bring the number of openings for the full year to 25.

“Over the long term, the company considers 1,000 stores to be a reasonable indication of its market opportunity in the United States as the Whole Foods Market brand continues to strengthen, consumer demand for natural and organic products continues to increase, and the company's flexibility on new store size opens up additional market opportunities,” the company said in a statement.

On top of what appears to be abundant expansion potential and tremendous sales and earnings momentum, Whole Foods is sitting on a pile of cash. The company ended the quarter with roughly $1.5 billion in cash and equivalents, roughly double the prior year level.