Armin. Inventory Yield & WFMI. I have a position. Positives you probably already know: specialty chain, room to grow, vitamin/health concept, building internet presence, high profit margins compared to big chains, building their in-store brands too. Negatives: others can come in. For example Central Market right in WFMI's Austin, TX home. (I will likely make a trip to Austin to see this concept -- and eat BBQ at Louie Mueller, the best (brisket, of course) in the US-- but that's another story -g-) For a nice write-up on Central Market (owned by HEB, a private co.)see article in 4/99 Fast Company Mag.
What's caused me to trim my full position is the short argument as explained by Herb Greenberg (TheStreet.com). Which is a financial aspect I just don't know enough about: inventory yield..."which some short-sellers view as the single most important warning of trouble...Inventory yield is calculated by taking gross profit, subtracting payables and dividing by inventories." For WFMI, he reports that inventory yields have been declining for two years.
Also he notes declines in inventory turns, ROA, and ROE.
I have not heard of this inventory yield metric or of its importance before. What do you guys make of it? (the metric that is, not my ignorance of it)
The stock has declined, while its competitor stock, OATS, is doing much better. I made my analysis based on psr. I realize some of these "gourmet" items they sell remain on the shelf a while, and there's plenty of expensive "gourmet" food spoilage. But I thought if they are getting the store traffic, they are expanding, and that if their price to sales were low enough vis-a-vis the big chains and OATS, the stock would be a good investment. Sure seems like OATS would have been the better buy though in retrospect - OATS moving way up to new high (too high perhaps) while WFMI approaching yearly lows.
Still I like WFMI and will add more if it does get to new lows. Debt/eq same as OATS (and both have lower ratios than a couple of the large "mainstream" chains) Psr is half that of OATS. |
