Gavekal Capital: A Look At Global Food Retailers

Thursday, February 20, 2014

A Look At Global Food Retailers

Last night news surfaced that Safeway, the US grocery store chain, was in talks to potentially sell itself. Whether this is the start of further consolidation in the food retail business is unclear, but it is clear that there a bunch of cheap looking stocks in the global food retail industry with perhaps one exception.

In the first table, we show the price to cash flow ratio for all the food retail companies in the MSCI World index. At 8.5x, the industry as a whole is selling at a 20% discount to the overall index. In the second table, we show price to sales ratio for all the food retail companies. At .2x sales, Safeway is among the cheapest companies, along with Kroger and Casino (a French grocer).

In both displays, it is easy to see the high regard in which investors hold Whole Foods. At 19.5x cash flow and 1.5x sales, it is far and away the most expensive large food retail company in the world.

Price to Cash Flow - World Food Retail Companies, 10 Year

Price to Sales - World Food Retail Companies, 10 Year

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