Forgive us longs stock researcher 58 if we are a bit jaded responding to shorts such as yourself. We've seen hundreds and hundreds of shorts like you come and go from this board over the last 10 years--all saying the same things over and over and over--"overvalued", "just a grocery store", "easy to compete with", etc. After awhile it becomes very tiresome to argue with them. Most of us longs just shrug our shoulders and smile. We know what lies ahead for 99% of the shorts who will hold their short too long and get caught in the next growth spurt of the stock. The shorts will then become angry and shrill, cursing the stupidity of investors for not understanding that the stock is just a grocery store that is radically overvalued. Then they leave the board, having lost a lot of money, but are always replaced by new shorts who see that the stock has hit new highs, has a 50+ PE, and is just a grocery store. These new shorts repeat the same stupid arguments believing they are both original and profound (they are of course, neither). When the stock inevitably slows its upward growth for a month or two between quarterly announcements, they strut around thinking they are brilliant investors and boasting about their small gains. Then the next outstanding quarterly announcement occurs and these "new shorts" disappear too. So the cycle goes. One thing I'm certain about--you won't be on this Board in 12 months and will probably be gone in less than 3.

I think you are wrong on so many of your assumptions that I hardly know where to begin:
1. Whole Foods isn't an "upscale food category". Rather they are by far the dominant player in a "food revolution" that is changing dietary and agricultural patterns throughout the nation and eventually the world. We are still relatively early in this revolution, but it will be the dominant paradigm in another 20 years.
2. Whole Foods has been in business for over 25 years. They haven't snuck up on anyone. Their competitors woke up long ago to the threat of Whole Foods and have been trying (unsuccessfully) to compete with them for over a decade. Whole Foods keeps taking market share from them in big chunks and there isn't a darn thing any of them can do about it.
3. Whole Foods success is only partly based upon what they sell--natural/organic foods. Wild Oats sells the same thing and they have been a terrible failure, having collectively lost money over their 18 years of existence. More important is the type of experience Whole Foods delivers to their customers, which is superior in every way to their conventional competition. Copying Whole Foods business strategy is also extremely difficult, because it is based on a number of innovations in the way they have organized their business and the commitment and relationship they have developed over time with their employees. Unionized conventional operators simply have no way to emulate Whole Foods strategy.
4. Whole Foods is far along to developing one of the "great legendary brands" of the 21st century. Albertson's, Kroger, and Safeway barely have brands at all, let alone brands that actually are significant to their customers.

It doesn't really matter whether you believe my confident and seemingly arrogant arguments, but Whole Foods numbers are harder to argue with. Their same store sales are 400% to 500% better than any of their public competitors. Their sales per square foot are 100% greater. Their growth rate is 500% to 600% higher. Their store ROIC is more than 100% greater. Yes, their PE ratio is also 300% higher too. So what? It should be 500% higher.