FINANCE ASSIGNMENT
Whole Foods Market (WFM) has experienced disappointing profits over the past few years despite increasing its revenues during the same interval. While WFM’s total revenues increased by approximately 2% in 2016, and 8% in 2015, its net income (profit) declined by about 5% and 7% in 2016 and 2015 respectively, indicating higher costs of operating their businesses. The size of the WFM balance sheet has been growing larger; however, the WFM common stock experienced high volatility and posted a devastating loss to its value from a high of $65/share in October 2013 to about $31/share in December 2016. This performance was more distressing to WFM investors as the S&P 500 stock index experienced gains during the same interval. The decision to open the lower-cost 365 supermarkets has been made against this financial background, in addition to other concerns relating to the long-term healthiness and growth of its core upscale supermarket business. Please answer the questions below. Use either the Bloomberg terminals located at the Feliciano School of Business or other reputable sources such as finance.yahoo.com, morningstar.com or Wall Street Journal etc. for the financial data you use in your answers. You need to cite the sources you use for the financial data at the end of the finance portion of the term paper.
Questions:
1. Opening a series of new supermarkets, such as 365, is a major capital budgeting project for the company. A project of this scale requires coordinated planning across all functions of a business that you are studying in your Integrated Core classes. Choose and discuss three items each on the income statement and the balance sheet that you think will be impacted by this new undertaking (a total of six items). Explain why you chose those particular items, and how those items might be impacted by the marketing, management and operations decisions of the company.
2. Explain how the financial decisions regarding opening the 365 supermarkets are related to management, marketing or operations decisions that the company must make (or has made) in light of the plans to open this new line of stores?
3. Choose and calculate five ratios for this company for the last two years. Make sure to select ratios that you think would be impacted by the opening of the new 365 stores, and explain your reasoning. Identify two competitors of WFM and contrast the ratios. Explain why you selected those competitors. Describe how the decisions made by management, marketing and operations functions of the company can impact, and hopefully improve, these financial ratios.
4. Calculate the annualized stock price return of WFM over the last 3, 5, and 10 years. How does it compare to the return of the competitors you selected in question 3 and the S&P 500 index over the same time periods? What kind of steps can the company take regarding management strategy, operational efficiency and marketing policy to improve the disappointing performance of this company going forward?