Answer Happy

Exhibit 7 Whole Foods Market: The Deutsche Bank Report Deutsche Bank Model (in millions of USD, except per share figures) Actual 2011 Actual 2012 Actual 2013 Forecast 2014 Forecast 2015 At Fiscal Year End Store Growth 4.0% 7.7% 8.1% 10.5% 12.6% Sales Growth EBITDA Margin Tax Rate 12.2% 8.5% 38.1% 15.7% 9.0% 38.4% 10.4% 9.5% 38.8% 11.1% 9.4% 39.0% 14.0% 9.8% 39.0% 6.5 11.9 Current Asset Turnover Current Liabilities Turnover Net PP&E / Store Annual Dep. & Amort./ Stor 7.0 11.5 6.4 1.00 5.6 12.0 6.5 0.93 7.0 11.6 6.7 0.94 7.1 11.6 6.7 0.94 6.7 0.94 311 335 362 400 450 10,108 859 311 11,699 1,055 311 12,917 1,222 339 14,351 1,352 376 Stores Sales EBITDA Dep. & Amort. EBIT Taxes Net Income Shares Outstanding Earnings per Share 548 744 209 16,360 1,600 423 1,176 459 717 372 339 883 343 540 372 1.45 286 458 364 1.26 976 381 596 372 1.60 350 0.97 1.93 Current Assets Current Liabilities Net Working Capital Net PP&E 1,453 880 573 2,103 977 26 2,193 1,980 1,088 892 2,050 1.238 812 2,680 2,304 1,406 898 1,997 2,428 3,018 Return on Capital 13.2% 13.8% 16.3% 17.1% 18.3%
4. Using Case Exhibit 7, which of the underlying financial assumptions regarding the variables above play the biggest role in driving the anticipated improvements in ROIC? (Conduct and report the results of a sensitivity analysis to quantify your answer, by varying the assumptions and noting the effect on ROIC.) An example of a sensitivity analysis would be something like the following: 2014 Forecast Low Base High Store Growth Sales Growth EBITDA Margin Current Asset Turnover Current Liabilities Turnover Net PP&E / Store Calculate ROIC for Each Possible Value of Inputs Where the possible inputs are: Store Growth Sales Growth EBITDA Margin Current Asset Turnover Current Liabilities Turnover Net PP&E / Store 2014 Forecast Low Base High 9.45% 10.50% 11.55% 9.99% 11.10% 12.21% 8.48% 9.42% 10.37% 6.30 7.00 9.45 10.50 11.55 6.03 6.70 7.37 7.70 Response: 5. Provide your group's best estimate of the most realistic assumptions and associated ROIC. Indicate where you agree and disagree with the existing financial assumptions in the Deutsche Bank Forecast. Be prepared to provide a brief narrative that is consistent with your forecast for Whole Foods' performance.