Supervalu, Inc., claims to be the largest publicly held food wholesaler in the United States. In addition to being a food wholesaler, it operates “extreme value” retail grocery stores under the name Save- A-Lot. Most of these discount stores are located in inner-city areas not served by others. Whole Food Markets claims to be the world’s largest retailer of natural and organic foods. Unlike Save-A-Lot stores that focuses on low-income customers, Whole Foods offers specialty products to customers with sufficient disposal income to spend on such goods. The following data were taken from these companies’ 2005 and 2004 annual reports. All dollar amounts are in thousands.

Required:

a. Before performing any calculations, speculate as to which company will have the highest gross margin and return on sales percentage. Explain the rationale for your decision.

b. Calculate the gross margin percentages for Supervalu and Whole Foods Market.

c. Calculate the return on sales percentages for Supervalu and Whole Foods Market.

d. Do the calculations from Requirements b and c confirm your speculations in Requirement a?

Transcribed Image Text:

Sales Cost of Goods Sold Net Income Supervalu, Inc. February 26, 2005 $19,543,240 16,681,472 385,823 Whole Foods September 26, 2004 $3,864,950 2,523,816 129,512