19-Apr-00 06:06 pm

I'm ready to stop talking about cash-on-cash returns whenever you stop claiming that WFMI has lousy store economics! Over the last 2 years you've made this statement repeatedly, but when challenged for evidence, you've been unable to produce any--except your claims to being a "professional investor" privy to all kinds of non-public, inside information about the company. As you say--"My numbers are my numbers." Fine--they are your numbers. However, they aren't the company's numbers or the sell side analysts' numbers who cover the company and they won't compel me or anyone else to believe your claims about lousy store economics for WFMI.

How ironic that you believe that "you (Rahodeb) act as if you know more than anyone else on this board... that is very patronizing". I act like I know more than anyone else! I'm patronizing! Geeze Hedge--look in the mirror sometime!

Well it seems that you are now willing to concede that over the long-term that WFMI has done o.k., but not great. I realize that you believe a 23% CAGR over 8 years is pretty mediocre performance but to most of the ordinary investors like myself--we're pretty happy with these returns. Sure, Whole Foods stock hasn't proven to be another Microsoft or Dell Computer but how many companies have? Do I wish I had put my life savings in Dell Computer 8 years ago? Of course! However, if I had picked Osborne Computer or maybe Ashton Tate I would obviously be less happy than I am with WFMI today. 20-20 hindsight.

You believe that WFMI is overpriced at 25 times earnings. It may be. Most of the market is still way overpriced based on historical measurements. WFMI is less overpriced than most of the market. Let's say that WFMI should be priced at its growth rate--20%, instead of at 25 times earnings (it is currently only at 23 times 2000 earnings). This would put its price at 38. If it is able to grow earnings 20% per year for the next 8 years it will have a price of $163 from a starting point of $38 if it continues to trade at a p.e. of 20. If WFMI stayed at a p.e. of 25 we can anticipate a price of $204 in 8 years.
Will WFMI miss any more quarterly estimates? Probably. If they miss a quarter in the next couple of quarters you may profit from your short at $44 a share. However, the company seems to have corrected the problems which caused it to miss back in the first quarter of 1999 and they seem to building strong positive momentum at this time. Same-store-sales remain strong and apparently most of their recent new stores have opened very strongly. If the new stores do well then they are unlikely to miss any quarters in the forseeable future. If so the stock will continue to climb. If they stay at 25 times forward earnings, once the market focuses on 2001, where consensus estimates are at $2.35 a share, we can expect a stock price of about $59 a share. I don't think they are going to miss in the next couple of quarters. I think your $44 short will be a loser for you if you don't cover in the near future. We shall see who is right about this.

Clearly we disagree about WFMI's future prospects. No doubt you believe it near impossible for WFMI to grow at 20% for 8 years. However, for the previous 8 years WFMI grew sales 42% CAGR ($92 million to $1.6 billion) and it grew earnings 51% CAGR ($1.6 million to $42.2 million) (p.2 WFMI Annual Report). Growing sales and earnings 20% for 8 years won't be easy but neither was the 42% and 51% CAGR they did in sales and earnings for the previous 8 years. I'm betting on WFMI and you are betting against them. Volatility aside, we shall see what the long-term direction of this company and its stock will be. I seriously doubt HedgeGP will
continue to be a participant on this Board 2 to 3 years from now (unless under a different name!).


Hedge
24-Apr-00 03:31 pm

I don't wish to argue with you whether I'm "patronizing" to you or not. It isn't my intention to be. However, I'm sorry if you perceive it that way. In any case, considering all the nasty things you've said about me over many posts my apparent "patronization" of you seems like pretty light stuff in comparison. You may want to read back on some of your previous posts where your attacks on my intelligence, knowledge, and investor acumen are pretty vicious. Poking fun at your pretentiousness to great expertise is well deserved Hedge! If you would stick to just making your arguments and backing them up with facts and evidence, instead of making incredible claims about your expertise, I would certainly be less tempted to poke a little bit of fun at you.

I agree with you about DCF being the ultimate determinate of stock price. I don't pay much attention to P/E ratios accept as a rhetorical tool, a short-hand way to communicate some valuation ideas. EVA measurement produces the exact same results as DCF and I think it is interesting that WFMI has converted to being an EVA company. Apparently they now agree with us about the importance of DCF.

I disagree with you about the relative importance of CAGR, however. I believe it is important because it clearly demonstrates that WFMI has performed very well in the past--something which you don't seem to believe or give them any credit for. Of course, the past doesn't prove anything about the future prospects and here is where our main disagreement clearly lies. I'm quite bullish about WFMI prospects. I reject your thesis that WFMI's "excess returns" will be competed away, at least in the short-term (it is also news to me that you now believe they've ever had "excess returns"!). WFMI has been increasing market share and gross margins for a number of years now. Why hasn't the competition already beat their "excess returns" back down. The opposite is the case: WFMI's strong comps and margin growth shows that they are clearly winning most of their competitive struggles. In a nutshell:
1. The market for organic and natural foods continues to rapidly grow.
2. WFMI is the clear leader in the category.
3. Their comps and margins are very strong indications of strong competitive positioning.
4. WFMI can probably double or triple their store count and sales before they begin to run into any saturation.
Who are the competitors that are going to knock WFMI's returns down? Isn't it simply obvious that WFMI is successful all over the country--not just Boulder? It is obvious to me that WFMI's stores are operated at a higher level of excellence than any other retail food store chain in the U.S. that I've seen. Who is better? Who is beating them? This company simply continues to get stronger every year. GOING FOWARD is what excites me most about WFMI! Clearly this is where we disagree the most.

I think WFMI will hit its announced growth target of 200 stores and $4 billion in sales in 2004 (1999 Annual Report, p. 1) and you don't. I believe their store cash-on-cash model and you don't. I believe that their emphasis on EVA will increase their productivity of capital. I believe they will be able to grow earnings at CAGR of 20% for the next 5 years and you don't.

I'm curious Hedge--do you believe WFMI will miss earnings in the next few quarters? If they don't miss do you really believe the stock price will still tumble and make your short play work? How long will you hold your short at $44 a share? Is is really a long-term fundamental short as you've indicated in the past or are you looking for a short-term profit only?


Hedge -- WFMI Competition
25-Apr-00 02:17 pm

Hedge, let me see if I understand your argument correctly: No one really bothers to compete with WFMI because no one really believes the concept is economically viable. Do you really believe this?!

WFMI currently has 110 stores and did $1.6 billion in sales in 1999, with estimated sales of about $2 billion in 2000. The company is opening 20 new stores in 2000 and has the public goal of 200 stores & $4 billion in sales in 2004. Where do you think all these sales are coming from? Do you believe people were not buying food in supermarkets before WFMI comes to a town? WFMI obvious competes against every other food retailer in every market they are doing business in. Not one of these competitors willingly concedes a single dollar of business to WFMI! Every food retailing dollar is fiercely contested and WFMI succeeds because it offers superior selection, value, ambience, and service to enough customers that the business is thriving. WFMI succeeds, not because no one is competitively trying as you seem to believe, but because they are winning these competitive battles against the nation's largest and most powerful supermarket competitors. WFMI is growing and thriving despite competition, not because there isn't any!

One place we disagree is about the potential size of WFMI's market. You seem to believe that WFMI only has appeal in selected markets such as Boulder and therefore they don't have much potential growth. This is obviously not true.WFMI has 10+ stores in Washington D.C., 10+ stores in Los Angeles, 8+ in San Francisco, 6+ in Chicago. They are currently in 22 states all across the U.S.A. WFMI can obviously thrive in any major metropolitan market in the U.S.A.. There are still several dozen markets they aren't in yet and those that they have entered aren't close to saturation. Furthermore, the market for natural and organic foods continues to rapidly grow each year at a rate of greater than 10%.

We come back once again to your basic belief that the store operating model for WFMI doesn't work. I say it does and have produced supporting evidence from the company and various analysts in support of my viewpoint.
The store operating model works and will work even better in the future as WFMI uses EVA in its decision making. This combined with tremendous growth opportunities in the overall market means that WFMI (in my opinion obviously) is not only not a good fundamental short as you seem to believe but is clearly a great long-term investment opportunity.

What is fun about this argument to me is that our respective views are empirically testable. Time will prove one of us right and the other one wrong. We will just have to wait and see how the company does over the next few years. I'll hold my long position and you hold your short position. We'll see who does better.


Hedge
26-Apr-00 09:01 pm

Your most recent argument boils down to 3 points:
1. WFMI is in a niche market and it isn't worth the time or money for supermarket chains to go after WFMI.
2. If this was such a good concept how come none of the venture capitalists are going after WFMI?
3. WFMI has a genuine following in some markets but limited appeal to secondary or tertiary markets.

I agree with point 1--WFMI is in a niche market and it isn't worth the time and money of most supermarket chains to go directly after the niche. However, unlike you I see this as a competitive advantage for WFMI. WFMI probably appeals to only about 10% to 20% of the population. The other 80% to 90% aren't interested. WFMI's focus on the niche--without focused competition--allows them produce higher profits than the might otherwise produce. The few supermarket chains--Star Market's Wild Harvest and Leo Kahn's Nature's Heartland--who directly competed in the niche against Bread & Circus (WFMI) apparently failed in the competition.

2. Several Venture Capitalists entered this market niche. Wild Oats, Alfalfas, & Fresh Fields all had Venture backing, as did WFMI. Only Wild Oats & WFMI remain. No new entrants are occurring because they are so far behind at this point. It is similar to asking why Starbucks doesn't have more competition? If their market is so good how come there isn't a strong #2? Interesting comparison considering that Starbucks sales and growth are roughly equal to WFMI! Do you believe Starbucks is in a crummy business? How come they don't have more competition if the returns are so good? I'll tell you why--Starbucks dominates their niche and competing against them is very difficult to do. WFMI is no different--they also dominate their niche and competing against them head to head is also extremely difficult!3. WFMI has limited appeal. True. The question is how big is their appeal. I believe it is much wider than you think it is. This is hardly a California/Boulder/Austin phenomenon. WFMI has more stores east of the Mississippi river than west of it. They have successful stores in the 10 largest metropolitan areas of the U.S.A. and they are continuing to grow very rapidly. Now that you've tipped off that you are from NYC you will have the delightful experience of watching New Yorkers flock to their 40,000 sq. ft. store in Chelsea next January. Maybe you think that WFMI with $4 billion in sales is still just a "flea", but these sales will catapult the company into the Fortune 500 and will produce net profits over $100 million.

Like I've said before--we'll see who is right about WFMI over time. Hold your short
position Hedge!


Hedge
28-Apr-00 12:50 pm

Now we are arguing about how big the market for natural and organic foods is. It is far, far bigger than 5% of the population! Are you familiar with the work of the sociologist Paul Ray? He wrote the Integral Culture Survey a few years ago. An abbreviated version of it can be found in American Demographics in a 1997 issue. Also the new publication The LOHAS (Lifestyles of Health & Sustainability) Journal published by Natural Business details Ray's research. In a nutshell: Paul Ray provides strong research evidence of 3 major lifestyle and values groupings in the United States:

1. Traditionalists--29% of the population. Older population group, small towns, family orientation, traditional religious orientation, nationalistic, return to America of the 1950's. Traditionalists are nostalgic for the past when the world was "the way things ought to be." Traditionalists do not share the values of the natural products market and are not a part of the target group. This group's numbers are declining each year.

2. Modernists--45% of the population. Dominant belief paradigm in U.S.A. The Modernist
worldview stresses the high value of personal success, money, social status, consumerism and materialism. Scientific, rationalistic, skeptical world view. Modernists view the world through a "Time Magazine" lens." Because Modernists are the dominant belief paradigm in America they see the traditionalists as old fashioned and out of date. They dismiss the Cultural Creatives as "flaky", "New Age", "crunchy granola heads", "tree huggers", and basically ridiculous and irrelevant. Modernists are attracted to natural & organic foods only on a limited basis if the ambience of the store is nice and the quality is high. Most modernists are skeptical of natural foods and see it as basically an unstainable fad.

3. Cultural Creatives consist of about 26% of the adult population of U.S.A. and is the fastest growing group--it was only about 4% of the adult population in 1969. The group has a definite female weighting with 60% of Cultural Creatives being women. This group is oriented towards a lifestyle of health and sustainability. Interested in alternative health, natural, organic, ethnic, and gourmet foods, foreign cultures, alternative spirituality, environmentalism and conservation, and sustainability in all forms. This group is extremely interested in natural food stores like Whole Foods. Probably 80% to 90% of WFMI's sales come from Cultural Creatives.

Like most other Modernists, Hedge, you forget that America is highly diverse. Since your paradigm world view is dominant in the media, in politics, and within your own circle of friends you mistakenly believe that other lifestyle of value groupings are small and irrelevant. Paul Ray's work shows that the Cultural Creatives are a significant minority in our society--26% of the population. It is this minority that is fueling WFMI's growth rate and it is why WFMI is very, very far from saturation in any of its markets. The growth of the Cultural Creatives will drive WFMI's growth for decades to come. Predictions for WFMI--$4 billion in sales by 2004 and over $10 billion by 2010.


More Hedge
28-Apr-00 01:04 pm

Why could no one compete with SBUX? Your argument is that if a concept is really any good and has good cash-on-cash returns then competition will enter and compete those returns down. Since WFMI doesn't have any "real competition" it must be a lousy business! SBUX on the other hand is a good business according to you. Why then hasn't anyone been able to compete their returns down? I believe it is because SBUX moved quickly and dominated the market. This is the exact same thing that WFMI is doing only you aren't giving them credit for it.

The reason you believe that SBUX is a great retail concept and WFMI is a mediocre one is because you are a Modernist, like most of the Investment Community (including skeptical Venture Capitalists). You can relate to a SBUX and can see that it is a sustainable business. SBUX growth has been primarily driven by Modernists like yourself--the 45% of the population committed to money and personal success as their highest value. Caffeine addiction fits in nicely with this value structure!

WFMI, on the other hand, has limited appeal to Modernists but high appeal to Cultural Creatives. Cultural Creatives are a smaller population cohort than Modernists--26%. WFMI, therefore, probably has less growth potential than SBUX. However, it nevertheless has huge growth potential! You are free to dismiss the "granola heads", "organic purists", & "tree huggers" as ridiculous if you want to. However, there are about 50 million adult Americans who seriously embrace these values and are driving WFMI's growth.

Hold that short long-term!

*** MAKES WEIRD COMMENT ABOUTH IS OWN HAIR!

whtmewrry 99
28-Apr-00 01:10 pm

I like Mackey's haircut. I think he looks cute! If his hair bothers you now you should have seen what it looked like 10 years ago! The guy was/is clearly into alternative lifestyles and is one of Paul Ray's Cultural Creatives I outlined in my 2 posts to Hedge.

You must not patronize any of WFMI's stores. Tatoos, piercings, unusual dress, and interesting haircuts are everywhere in the stores. In comparison, Mackey looks like a model for Brooks Brothers!


Hedge
28-Apr-00 03:29 pm

While I don't want to quibble with you about whether you are a Cultural Creative or not I believe that if you ever read Paul Ray's work you will see yourself as a Modernist instead of a Cultural Creative. Certainly the values that you have defended on this Board are Modernist and the values you have attacked are Cultural Creatives.

Why is that everytime I produce arguments from other people to support my viewpoints you accuse me of not thinking? (by the way, such attacks on my thinking ability are pretty "patronizing"!) Producing external arguments to support one's viewpoint is Debating 101. You seem to believe that your opinions are not to be questioned by anyone else and that you don't need to back up your "thinking" with any facts, evidence, or arguments.

I also don't "twist your thinking" Hedge to fit my argument. I listen carefully to what you say and then point out the flaws in your reasoning. Since you don't feel the need to support your positions with facts, examples, or evidence it isn't difficult to point out the contradictions and gaps in your arguments.

Please get off "I am a professional" argument. So what! Who cares?

You don't think SBUX is a great concept anymore? Come on! Its obviously still a great concept and they have tremendous growth ahead for them-internationally especially. If SBUX isn't a great concept, and WFMI isn't either--who does have a great concept? SBUX may be overvalued but surely it remains a great concept! The same is true for WFMI--time has proven this to be true in the past and time will prove it to be true in the future.

Hedge, the following quote is typical of you on this Board "herefore, your dissertation re how the population is segmented is laughable. It is my ability to think creatively and to not have my thinking have to be put in a box that makes us different. You can throw around all of the numbers you want, and mention all of the PhD's you want, and mention all of the sell-side analysts you want as well. What it does is demonstrate an inability to think on your own. Which is exactly what I look for in shorting a stock, for it creates a long bias that provides me with an investment advantage (as it did in the case of SBUX)." Do you understand that you aren't making any kind of argument here? Saying Paul Ray's work is "laughable" without any countervailing examples, arguments, or evidence isn't an argument! It just reveals your own inability to think clearly and argue persuasively.

What are we disagreeing on? How big WFMI's potential market really is. You say it is very small and I say it is much larger. In support of my viewpoint I produce external facts, evidence, and rational arguments. In support of your viewpoint you produce what? Ridicule! Nothing else. It is similar to the argument we had about cash-on-cash returns. In support of my position I produce WFMI's own statements plus 2 sell-side analysts. In support of your position you produce what? Nothing!! Just your own opinions which you now support by claiming you are a "creative thinker" while others are non-thinking fools who don't use common sense!

In fact WFMI ultimately does appeal to most of the Cultural Creatives and that is why it is such a great investment opportunity. The Natural Products industry is now a $26 billion industry so WFMI has only about a 6% market share. This company will continue to show very rapid growth for many years to come. WMFI will eventually dominate this industry like Starbucks does coffee and Home Depot does home improvement centers.

Hold your short long-term Hedge!


Hedge
2-May-00 02:48 pm

"Forget all of your nonsense"--pretty patronizing Hedge!

I grasp your "logic" Hedge. I just don't agree with it! Your argument reduces down to an Efficient Market Hypothesis--"If WFMI really has great market potential then they would have attracted more competition and more capital into the industry. It simply isn't possible for the market to overlook a great investment opportunity."

1. WFMI has great market growth still ahead and I've given good arguments in many previous posts as to why this is so.

2. Markets are frequently inefficient and that is what creates opportunity for investors.
You yourself Hedge consistently argue that the market is inefficient concerning WFMI. You have stated many times that all the "idiots" such as myself are what create market inefficiencies and opportunities for "skilled professionals" such as yourself. Don't you see that you are contradicting yourself here, Hedge? If markets are always efficient then WFMI is always priced
correctly by the market and your short position is illogical since you clearly believe the stock is overpriced and should drop. If markets can be inefficient then it is possible that the market potential of WFMI may be much larger than either you or the market currently believe. I believe the market potential for natural and organic foods is quite large. The potential size of this market is continually underestimated by Hedge and most other Modernists who dismiss the Cultural Creative value system as "nonsense" and refuse to consider the evidence that the number of people in our society embracing such values is actually quite high.

3. Contrary to your belief both capital and competition have increased in the Natural Products Industry in large quantities over the last several years. WFMI is winning despite the competition--not because there isn't any.

Our differences of opinions on these matters will be determined empirically over time.

Hold that short long-term Hedge!


Hedge
2-May-00 07:40 pm

It's like I'm talking to a wall sometimes.

A market opportunity can be great but not recognized by very many people! Do you deny this? Is this not possible in the case of WFMI? Your argument is that if the market opportunity is great someone besides Whole Foods Market would have acted upon it. This doesn't necessarily or logically follow. Great market opportunities can remain unexploited or only partially exploited for many years. Where was the book industry before Book Stop invented the superstore back in the early 1980's? Slow growth. Book Stop created a new category and then Barnes & Noble and Borders made it work on a large scale--dominating the category--at least until Amazon came along--and increasing the selection and the quantity of books purchased by huge multiples. Coffee was a no growth industry until Starbucks upgraded quality and ambience and made it into an "experience". This no growth category has now exploded—and Starbucks dominates it. Whole Foods is doing the exact same thing but you are choosing not to see it! They have taken a no growth industry--food retailing--and they have reconceptualized the grocery store into an upscale, service oriented, information intensive, "wellness" superstore. This is exactly what a sizeable segment of the market--15% to 20%--wants. As a result their business is rapidly growing with very high comp. sales, sales per sq. ft. and high customer satisfaction all occurring. You acknowledge that the company has great comp. sales and sales per sq. ft. but dismiss this as irrelevant because they pay too much money to generate the results. When I produce evidence supporting very good store economic returns you dismiss the evidence as inaccurate and misleading. You are the "wall" in this dialogue, Hedge!

Who are the copy cats of WFMI?

1. Fresh Fields
2. Wild Oats
3. Wild Harvest
4. Nature's Heartland
5. Wild By Nature

Supermarkets influenced by WFMI with alternative formats created and/or major commitments to natural/organic foods. This list would include every large supermarket chain in the United states. The most notable ones that I know about:
1. HEB--Central Market & large format HEB stores.
2. Star Market
3. Andronicos
4. Hannaford
5. Randalls
6. Fred Meyer
7.Ralphs
8. Vons
9. Dominicks
10. Lunds & Byerly's
11. Fairway Markets

Who has Whole Foods directly influenced in the $26 Billion Natural Products Industry? Everyone!!

Our differences in opinion will be empirically tested in the years to come.
Hold that short long-term Hedge!

*** HE BASICALLY NEVER STOPS ARGUING WITH “HEDGE”

OATS has never made a dime!
17-May-00 12:58 pm

Time for a reality check on OATS jvcriton:1. They aren't the largest natural food chain and never have been. They have fewer total stores than Whole Foods and their sales are less than 1/2 of Whole Foods. Don't forget they are closing 8 stores as well. Better stop counting these 8 in the total store count.

2. This company has never been profitable when all their writeoffs are included. They took a major writeoff before they went public ($6 million I believe). They took a $11 million writeoff for failed stores only 1 year ago. Now they are taking a $20 million writeoff for failed stores this year. My math says they've taken $37 million in writeoffs on failed stores. Add up their reported "profits" over the last 6 years and you'll see that it barely covers all these losses. OATS constantly boasts about never missing a quarter! The facts are that they've never made a quarter! No doubt OATS plays various accounting games to create the illusion that they are growing earnings. It wouldn't surprise me if they find ways to overaccrue their writeoffs and add some of it back into their operating numbers.

3. WFMI is killiing OATS in previous OATS strongholds in Boulder and Santa Fe. Denver is next, with St. Louis, Ft. Lauderdale, and others to follow. Despite OATS claims to the contrary they have not shown they can compete head to head with Whole Foods large store format. That is why they are trying to upgrade their stores, make them larger, and expand their product mix--to be more like WFMI. They lack the infrastructure or the talent base to pull it off, however.

4. OATS has made several poor acquisitions in the last couple of years which they overpaid for--Nature's and Wild Harvest are 2 examples. These poor acquisitions, combined with their inability to compete with WFMI, has resulted in negative comps. OATS identical store sales are far worse than their comps, however, because OATS "gooses" their comps through relocating small, low volume stores to larger, high volume stores and counting the sales gains in their comp base. The reason they don't report identical store sales is because they are really, really weak. Every other public food retailer but OATS reports identical store sales. OATS is the only one who doesn't. Why is that?

5. This company has misallocated capital on a grand scale between all the failed stores and poor acquisitions they have made.

6. OATS management sold a ton of shares in March of this year. The management team knew what was happening with their comps and their money losing stores and took a nice chunk of profits before disclosing this information to the general public. Expect shareholder lawsuits over this.


jvcriton
17-May-00 03:27 pm

Add up the numbers. OATS has taken writeoffs of $37 million over the last 6 years. So yes I'm saying all those eps are illusionary! This company isn't making any money and never has. It doesn't have a 2.5% profit margin and never has. It's price to book and price to sales are certainly far, far lower than WFMI. Failed stores are failed stores. They count against earnings. I don't know about their future plans. I only know that this company's past plans haven't worked. I'm just calling a spade a spade. Why can't you?


tofu hotdog
18-May-00 07:54 pm

I'm not sure that OATS really has a 2 pronged approach to new stores. It is quite possible that this repositioning was just an attempt to be distract people from the closing of 8 failed stores. For years OATS has talked about another 2 pronged approach that they called their "flexible format". The flexible format was larger stores in suburban areas and smaller stores in urban areas. WFMI just focused on building larger stores wherever they could. That strategy now appears to be the winning strategy and OATS looks like they are going to try to copy it. The big question is whether they have the team to execute large store perishables at a high level of quality.

OATS management is very proud of their Henry's acquisition and this appears to be their new "second prong". I think the farmers market idea as Henry executes it has some market potential, ut probably less than OATS believes. San Diego is a very price oriented market. They may discover the idea doesn't transfer that well to other markets. We shall see.


tofu hotdog
19-May-00 01:54 pm

I've shorted OATS in the past and made good money, but regretfully I missed the recent crash in their stock. Would I buy OATS at any price? Sure. I'm probably a buyer if they fall below $7 a share.

I wouldn't make too big a deal out of management saying their Orange Co. is doing well. They always say that. The real test will come when they put a Henry's store directly up against a Whole Foods store. Do you remember that a year ago OATS management was making a real big deal out of their new low priced concept store, People's Market? This store was located less than 1 mile from Whole Food's Evanston store. What happened? How come they haven't opened any more People's Market stores? How come they opened a People's Market store to compete against Whole Foods in the first place? Why didn't they open a Wild Oats store to do battle? Where has Wild Oats ever successfully competed head to head with Whole Foods?


Hedge
19-May-00 08:35 pm

zzzzzzzzzzzzzzzzzzzzzz...the more times I prove you wrong the sillier you look on this board and the less authority you have working your short agenda.The numbers I gave on that last post were all accurate numbers. All year-over-year numbers were compiled from the same time periods. These were the exact losing prices on these days. The value appreciation is clear and obvious and all your misrepresentations to the contrary do not change the facts.

Your numbers in contrast are not accurate numbers. You continue to throw numbers on this board to prop up your B.S. that do not tie back to reality. A great example of this is when you simply made up numbers about WFMI's store economic model. You claimed Bonnie Tonneson backed you up but in fact her published numbers backed up me--not you. Your only reply was to fall back on your "professional status" and claim that WFMI and sell-side analyst numbers don't mean anything.

Yes WFMI is down from 2 years ago. This is the only thing in your previous post that is accurate. All the rest of your numbers are inaccurate if year-over-year dates are used. I don't have any idea where your numbers come from.

I am frustrated--not with WFMI but with you. Your lack of intellectual honesty in
these matters is frustrating to me.

Our differences in opinion will be empirically tested over time.

Hedge scorecard on 1/24 WFMI short at $44 +14% (congratulations--so far).

Hold that short long-term Hedge!



compewterdr
9-Jul-00 11:43 pm

Mackey's role as Co-CEO of Gaiam.com is likely more titular and transitional than meaningful involvement. However, considering the fact that so many people on this Board think he is a terrible CEO (you in particular compewterdr) I would think any involvement in Gaiam.com would be seen as a plus for WFMI because it means less attention focused on the core retail business.

The dot com is a thing of the past because Gaiam.com is profitable. It won't affect WFMI's earnings. If Gaiam.com has a successful IPO then there is upside for WFMI.

You are mistaken--the agreement with Gaiam.com does include Amrion's dot com businesses--BioenergyNutrients.com and HealthSmartVitamins.com. Gaiam.com will most surely be adding WholePeople.com products in the near future. We don't know what WholePeople.com sales are/were because they were never disclosed for competitive reasons.


erewhonian
2-Aug-00 11:55 am

Why do you believe that Whole Foods would be interested in purchasing Wild Oats? I can think of several reasons they wouldn't be:

1. Whole Foods is beating OATS badly in head to head competition--Boulder & Santa Fe. In the next 12 months Whole Foods has additional stores scheduled to open in Denver, St. Louis, Ft. Lauderdale, & Boca Raton which will go head to head with OATS.

2. OATS has negative comps and a merger with Whole Foods will have a negative impact on Whole Food's comps.

3. OATS stores are much smaller with much lower sales and sales per sq. ft. than Whole Foods. It is unlikely that Whole Foods wants to buy a bunch of small, low volume stores which don't fit its store prototype.

4. In the last year Wild Oats has purchased 2 companies, Sun Harvest and Henry's, which aren't really natural food stores. Many of the products these companies sell do not fit within the product standards of Whole Foods. I doubt Whole Foods is interested in these stores.


compewterdr
2-Aug-00 05:36 pm

Thanks. I like your posts too, even when I disagree with them because they are intelligent, well thought out, and seldom do you put anyone else down (except for Mackey who you obviously dislike).

1. Your point is well made on Jirka. I believe Mackey has also joined Gaiam's Board. It is probable that this was simply part of the deal the 2 companies made.

3. You are right that the gainsharing system is not perfect protection in a rising labor market because labor budgets can be increased. However, WFMI's system does create much more labor flexibility than most other companies have. Perhaps rising labor is one of the factors for WFMI having rising direct expenses. Maybe mix changes and new stores explain some of the expense increases but not all.

5. Amrion wasn't restructured in the fall of 1999. It was combined with wholefoods.com to form WholePeople.com. It has been restructured now and 66 employees were laid off. Losing 66 employees alone is probably worth $2 million in costs.

I disagree with both of your explanations about WholePeople.com--segregate Amrion and get rich scheme for Mackey.

A. Amrion was profitable in 1997- 1999. If it had not combined with wholefoods.com and changed its focus it probably would have been profitable in 2000 as well. WholePeople.com messed it up. It will return to profitability soon enough.

B. Mackey is already rich. Based on his current stock ownership plus his options he is worth between $20 million and $30 million. Since he caps his own salary and doesn't take larger option grants than any other senior executive, greed doesn't seem to be the best explanation for his motivation.

Why do you disagree with the company's explanation? WFMI believes in the future of the internet and wanted to be a player in it. However, since WholePeople.com was hurting its stock price so much, WFMI decided to exit from direct involvement and has teamed up with Rysavy and Gaiam. Gaiam just reported Gaiam.com's numbers yesterday--$3 million in sales for the quarter, 56% gross margins, and 5% pre-tax net. These numbers don't include any impact that that Whole Foods Market's marketing support for Gaiam.com is going to have in the future since the deal closed just prior to the quarter ending. Amrion owns 49.9% of Gaiam.com. Someday this ownership stake is going to be recognized as a nice gain for WFMI.

You seem obsessed with Amrion's shield. WFMI created the shield with VC money not to protect itself from Amrion but from the dot com business. The previous 3 years Amrion made high profits. I believe they will again now that they are refocusing on this business instead of the dot com business. I believe we just need to wait a couple of quarters to let that management team clean up the dot com residual mess and we shall see Amrion profitable again. If it doesn't become profitable I seriously doubt that WFMI's management will keep the business. Too much time ends up being wasted talking about something that isn't really very important to WFMI.

WFMI says that they have cash-on-cash returns (pre-tax) of 36% by the third year of store operations and 50% by year 5. This seems pretty good to me and I see no reason to think they are lying about it.

compewterdr
9-Aug-00 03:52 pm

The fact that Mackey said that someday in the future WFMI would "provide liquidity" for the VCs does not mean a deal was cut--it is in fact speculation on your part. Mackey and WFMI probably fully intend to buy out the VCs interest in Amrion sometime in the future at some undetermined price. He probably feels an ethical obligation to do so as well as desiring to have 100% control of the business again. If you find out anything substantive here in WFMI legal filings then let us know.

The VCs were speculating on the Internet Bubble through their investment in WholePeople.com and that Bubble has popped. They still have upside potential through their investment in Gaiam.com which is already profitable. Sometime in the next 12 months or so, we are likely to see Gaiam.com go public. Why do you say the VCs lost enthusiasm about Gaiam.com?

WholePeople.com has already taken their big writeoff in the earnings release just given. I doubt we will see anymore "special charges" in the future. They've already been done.

We can speculate endlessly about Amrion and what its future will be. Let's see what happens over the next few quarters. I have confidence that this business will return to profitability.


OATS being sold
15-Aug-00 07:43 pm

Who would want to buy OATS? Surely no convention supermarket chain would. A bunch of small stores with low sales volumes and negative comp. sales. Remember most supermarket chains are unionized. No way the unions are going to let OATS stay non-union if bought by a conventional operator. $20 a share?! Highly dilutive for any conventional chain.

WFMI is the only logical buyer for this company and I can't see it happening anytime soon. Why would WFMI want to take on all the OATS problems?


LohasJournal.com
14-Oct-00 10:41 am

Check out the recent issue in LohasJournal.comfor interesting information on Whole Foods, Gaiam, and WholePeople.com. Mackey does a lengthy interview. Also Paul Ray's book on Cultural Creatives is now available (titled Cultural Creatives). I think after reading this book you'll see why I'm optimistic about the long-term growth of Whole Foods. Their market of core customers is growing at a very rapid rate and promises to continue to grow for many years to come.


OATS stock isn't going anywhere
30-Oct-00 02:34 pm

Fundamentals ultimately drive stock prices and OATS fundamentals are simply awful. 1. They had negative 3% same store sales.
2. They only hit 22% of their projected earnings number--$.05 vs. $.23.
3. Total sales increase for 2001 is projected to be up only 3% to 5%.
4. Earnings next year are projected to decline to only $.30 to $.35.
OATS shouldn't sell at more than 10 X 2001 earnings. This is a $3.00 stock. The only thing keeping it above this is buy-out speculation. Once the market figures out that WFMI isn't going to buy this company, it's headed to $3.00--or less.


Re: Stealth Preannouncement?
30-Oct-00 05:49 pm

Hey j gilliland77--any connection to Mike Gilliland the CEO of OATS?

Of course the tax rate is significant. Going from 42% to 40% increases earnings a couple of million dollars and EPS $.06 to $.08. Money they don't have to give to the government is money they can invest in opening new stores and is money they don't have to borrow and pay interest on.

WFMI has never tried to "sweep" Amrion under the rug. They've always been completely candid about Amrion and have always disclosed its results every quarter. What are you talking about?


Re: Analysts opinions...
3-Nov-00 02:42 pm

erewhonian--Why would Kroger want to buy OATS? OATS has a bunch of small, low volume stores with negative comps. How does it fit with Kroger?


Re: WATCH!
13-Jan-01 02:00 pm

Hey mancreo--here are some "great" things for OATS that you can look forward to in 2001.
1. Boca Raton
2. Ft. Lauderdale
3. Kansas City
4. St. Louis
5. Phoenix
6. Chicago
7. Santa Monica
These are all locations that Whole Foods has scheduled to open in 2001. All compete directly with OATS stores. Have you been watching what has been happening in Boulder, Santa Fe, Hollywood, CA, and Denver? Whole Foods is crushing OATS where they go head to head. Look for more of the same in 2001.


OATS stock headed to below $4.00
10-May-01 05:48 pm

It will still be overvalued at $3.00 a share. Do you realize that with the recent planned writeoffs that OATS has not made an overall profit it its entire 13 year history?


Re: Just compare oats vs wfmi
23-Aug-01 11:44 pm

wortmanave,
I'm long WFMI (for many years now). Have shorted OATS several times over the last 4 years and have made a ton of money doing it. Most recently covered my latest short at $9.00 (probably too soon but I couldn't resist a quick profit on a 3 day short) which I made when the stock hit $11.50. I'll short it again if it gets above $11.00. I don't think much of the future prospects of the business as my previous posts should make fairly clear.

Why does OATS have more upside potential than WFMI? Don't think so. OATS is a company in deep, deep trouble. I don't think it has much of a future at all. It hasn't shown it can successfully compete in the marketplace, doesn't have a proven business model that works, is loaded with debt, has negative cash flow when depreciation is considered, doesn't have any cash to grow at this time, has a new management team inexperienced in food retailing or natural products, and is about to get hit hard by Whole Foods in several of its previously uncontested cash-cow markets. WFMI, on the other hand, has compounded its stock price annually at 23.9% for the last 9.6 years, had over 10% comp sales its last quarter, and is on a real roll.

Tell you what, we'll let time settle our differences of opinions about OATS future prospects. I'll bet you that OATS stock price is below its current price on September 1, 2002 and that WFMI is trading above $40 a share on the same date (20%+ gain). Just a friendly wager (we can make our actual cash bets on the stocks) that we can watch over the next 12 months and then see which of us is right at that time. What do you say? Do we have a bet?