What the heck to do with Whole Foods

There is no doubt to Jim Cramer that Whole Foods is a great place to shop. But with those same-store-sales numbers reported on Wednesday, what the heck is he supposed to do with the stock?

"I left work last night puzzled and unsatisfied about how to deal with Whole Foods after its hideous decline. Sometimes a company defies its stock, and sometimes a stock defies its company, and I fear this is one of those times," the "Mad Money" host said.

Cramer loves the experience of walking around his local Whole Foods in Brooklyn. While some may complain that it's too expensive, he only thinks consumers are paying up for the prepared foods, which taste great and are still cheaper than going to a restaurant.

However, Whole Foods' same-store-sales figure of less than 3 percent obviously disappointed investors, and the stock was hit hard.





A man walks into a Whole Foods Market in Brooklyn, New York.
Getty Images
A man walks into a Whole Foods Market in Brooklyn, New York.

How could it do so miserably when stores like Kroger, which Cramer always thought was inferior to Whole Foods, had a same-store sales rate of about 4 percent? Even Costco, which Cramer views as being the same level as Whole Foods, reported a 7 percent range.

The obvious answer is that there is an increased amount of competition in the organic and natural food space, which has reduced traffic and lowered prices. What used to be a niche corner of the market has been adopted by the masses, even as Wal-Mart and Target get in on the action.

So yes, the competition and cannibalization of new stores created Wednesday's number.

But what if there is more to the story?

"The bigger issues is that perhaps same-store sales just isn't the metric we should be using to grade Whole Foods," Cramer added.

Honestly, if this were the only number that were used to value Whole Foods versus the competition, then Cramer thinks the stock would be cut in half.

But when he considers the fact that the company generates $720,000 a week per store, let alone its immense growth potential, then Cramer has to question if it's really worth only $9 billion?

"I think the opportunity is way bigger than that market capitalization."

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So, what the heck do you use to measure Whole Foods? The same-store-sales metric has always been key because it can show organic growth by discounting new locations that need time to grow.

At this point, Cramer is completely puzzled. This Whole Foods fiasco has made him question his own methodologies. Maybe it needs that new, smaller-store concept, or maybe the same store measurement is still good and the stock just needs to take a beating.

Either way, Cramer has deduced that this stock is not a bargain, and until it can demonstrate consistent growth, he will not recommend it.

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