This case examines the decisions of Deutsche Bank research analyst Karen Short in May 2014 while covering the stock of Whole Foods Market, a leading natural and organic food retailer at the time. Having recently issued a buy recommendation for the stock backed by a strong financial forecast, Short must reevaluate her decision in the face of a lower-than-expected earnings announcement by Whole Foods management and an associated market price decline. Scrutinize Karen Short's financial forecast and consider the developing industry dynamics and Whole Foods competitive position. Carefully evaluate the appropriateness of Shorts current financial forecast using financial statement modeling and sensitivity analysis.

How would you describe Whole Foods strategy?

Prepare a competitor analysis. How would you define Whole Foods industry? Who are Whole Foods competitors?

How attractive is Whole Foods current market position? Is it sustainable?

What do the financial ratios in Exhibit 4 tell you about the past operating performance of Whole Foods? How informative are the historical ratios for Whole Foods prospective performance?

Examine Exhibit 7 in detail. How important are each of the underlying financial assumptions in the ROA forecast? What assumptions (i.e., margins, asset turnover, growth) play the biggest role in driving the anticipated improvements in ROA?

Do you agree with the existing financial assumptions in the Deutsche Bank forecast? If so, why? If not, what adjustments would you make to the model? Be prepared to defend the basis of your forecast for Whole Foods performance.

9 Sales Growth Source: Company SEC Filings. WHOLE FOODS MARKET Deutsche Bank Model (millions of USD, except per share figures) Source: Lompany rinancial Keports, veutsche Bank Analyst report and casewriter estmates 9 Sales Growth Source: Company SEC Filings. WHOLE FOODS MARKET Deutsche Bank Model (millions of USD, except per share figures) Source: Lompany rinancial Keports, veutsche Bank Analyst report and casewriter estmates