13.2.2003: Meldung: Whole Foods Market Reports Results
"The economy continues to have little to no apparent impact on our sales. For the fourth consecutive quarter, we delivered comparable store sales increases of over 10%," said John Mackey, Chairman, President and Chief Executive Officer of Whole Foods Market. "We leveraged our strong sales gains, producing a 37 basis point improvement in operating margin before pre- opening and interest expense."
Net income for the quarter increased 27% to $25.6 million from $20.1 million in the prior year, and diluted earnings per share increased 22% to $0.42, compared to $0.34 in the prior year. Net income and diluted earnings per share include a pre-tax impairment charge of $1.4 million, or $0.01 in diluted earnings per share, relating to the Company""s investment in Gaiam, Inc.
Net operating profit after tax (NOPAT) increased 20% to $27.4 million, and total capital increased 9% to $1.1 billion for the quarter. The Company""s capital charge for the quarter was $34.4 million, resulting in Economic Value Added (EVA) of negative $7.0 million, a $0.9 million improvement over the prior year.
Store returns for the first quarter: # of Average Average NOPAT Comp Size Comps ROIC Stores Stores over five years old 27,400 6.7% 53% 81 Stores between two and five years old 35,600 13.3% 22% 34 Stores less than two years old (including relocations) 33,500 33.0% 8% 12 All stores in comparable store base 30,100 10.5% 32% 127 All stores 30,600 26% 140
Gross profit increased 19% to $314.6 million from $264.7 million in the prior quarter. Gross profit as a percentage of sales increased 15 basis points to 34.1% of sales. Direct store expenses increased 18% to $233.5 million from $197.3 million in the prior quarter. Direct store expenses as a percentage of sales were flat at 25.3%. A decrease in total wages was more than offset by higher health care expenses primarily related to the Company""s previous health care plan which was replaced with a new health care plan effective January 1, 2003. Store contribution increased 20% to $81.0 million from $67.4 million in the prior quarter. Store contribution as a percentage of sales improved 14 basis points to 8.8%.
For the 127 stores in the comparable store base, gross profit increased 31 basis points to 34.3% of sales, direct store expenses decreased 47 basis points to 24.8% of sales, and store contribution improved 78 basis points to 9.5% of sales.
General and administrative (G&A) expenses increased 11% to $31.2 million from $28.2 million in the prior year. As a percentage of sales, G&A decreased 23 basis points from the prior year. Depreciation and amortization totaled $28.8 million in the quarter, and EBITDA increased 20% to $74.8 million or 8.1% of sales.
The Company produced cash flow from operations of $71 million. Capital expenditures for the quarter were $59 million of which $32 million was for new store development. At the end of the quarter, the Company had approximately $45 million in cash and approximately $169 million in long-term debt. The Company currently has no amounts drawn on its $220 million line of credit.
The Company recently announced that in the event any or all of the holders of its Zero Coupon Convertible Debentures due 2018 elect to exercise their right to require the Company on March 2, 2003 to purchase any or all of the Debentures, the Company would purchase those Debentures using cash, rather than the Company""s common stock or a combination thereof. The accreted value of the Debentures as of March 2, 2003 will be approximately $147 million. If any or all of the debentures are put back to the Company, the Company""s convertible debt would be replaced with credit line debt resulting in no change to the Company""s total debt or debt-to-equity ratio. The Company has no immediate plans to call the Debentures.
The Company opened five new stores in the first quarter, ending the quarter with 140 stores. So far during the second quarter, the Company has opened two new stores. The Company has recently signed leases for seven new stores in Bellevue, WA; Louisville, KY; Valencia, CA; Long Beach, CA; Fort Collins, CO; Sarasota, FL; and West Vancouver, British Columbia. The Company currently has 23 stores in development averaging 42,000 square feet in size. Square footage under development totals approximately one million square feet, including 68,000 square feet related to expansions of existing stores scheduled for the second half of fiscal year 2003.
Goals for fiscal year 2003:
For fiscal year 2003, the Company is maintaining its previously stated sales growth guidance of 15% to 20%. Comparable store sales are expected to increase 8% to 9% in the second quarter and 6.5% to 8.5% for the remainder of the year. The Company is up against a 10.1% comparable store sales increase in the prior year, and the continued uncertainty in the economy and political environment makes it difficult to predict future sales trends. In addition, the three Harry""s Farmers Market stores will be in the comparable store base for the full quarter.
The Company expects weighted average square footage growth of 12% to 14% for the year, including expansions of existing stores. In the second quarter, the Company has opened two stores and expects to open one additional store. The Company expects to open four to seven new stores in the second half of the year, one of which will be a relocation of an existing store. In addition, the Company expects an increase of approximately 68,000 square feet related to expansions of existing stores scheduled for the second half of fiscal year 2003.
The Company expects gross profit to be flat to slightly higher as a percentage of sales. While the Company believes further opportunities exist to leverage cost of goods sold, the Company wishes to maintain pricing flexibility in the event of further or prolonged economic weakness. The Company is focused on producing operating margin improvement primarily through the leveraging of direct store expenses and general and administrative expenses both of which are expected to decrease incrementally as a percentage of sales. Pre-opening and relocation expense is expected to be in the range of $8 million to $10 million and more heavily weighted in the first half of the year.
Absent any significant cash acquisitions or change in status of the Company""s outstanding zero coupon convertible bond issue, the Company does not expect any borrowings for the year. Including the $1.4 million Gaiam impairment charge, the Company expects net interest/investment expense to be at the upper end of its previously stated $6 million to $8 million guidance. Capital expenditures are expected to be in the range of $180 million to $200 million for the year.
The Company is maintaining its diluted earnings per share guidance for the fiscal year of $1.62 to $1.69 and expects to produce EVA improvement of between $7 million to $10 million for the fiscal year.
About Whole Foods Market:
Founded in 1980 in Austin, Texas, Whole Foods Market(R) (http://www.wholefoodsmarket.com/ ) is the largest natural and organic foods supermarket retailer. In fiscal year 2002, the company had sales of $2.7 billion and currently has 142 stores in the United States and Canada.
The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the timely development and opening of new stores, the integration of acquired stores, the impact of competition, and other risks detailed from time to time in the Company""s SEC reports, including the report on Form 10K for the fiscal year ended September 29, 2002. The Company does not undertake any obligation to update forward-looking statements.
Whole Foods Market, Inc. Condensed Consolidated Income Statements (unaudited, in thousands except per share amounts) Sixteen weeks ended January 19, January 20, 2003 2002 Sales $ 923,760 $ 780,799 Cost of goods sold and occupancy costs 609,190 516,077 Gross profit 314,570 264,722 Direct store expenses 233,544 197,297 Store contribution 81,026 67,425 General and administrative expenses 31,176 28,180 Pre-opening and relocation costs 3,836 2,239 Income from operation 46,014 37,006 Other income (expense): Interest expense (2,565) (3,969) Investment and other income (expense) (720) 531 Income before income taxes 42,729 33,568 Provision for income taxes 17,092 13,427 Net income $ 25,637 $ 20,141 Basic earnings per share $ 0.44 $ 0.36 Weighted average shares outstanding 58,036 55,210 Diluted earnings per share $ 0.42 $ 0.34 Weighted average shares outstanding, diluted basis 64,738 58,974 A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in thousands): Sixteen weeks ended January 19, January 20, 2003 2002 Net income (numerator for basic earnings per share) $ 25,637 $ 20,141 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 1,356 --- Adjusted net income (numerator for diluted earnings per share) $ 26,993 $ 20,141 Weighted average common shares outstanding (denominator for basic earnings per share) 58,036 55,210 Potential common shares outstanding: Assumed conversion of 5% zero coupon subordinated debentures 3,285 --- Assumed exercise of stock options 3,417 3,764 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 64,738 58,974 Whole Foods Market, Inc. Condensed Consolidated Balance Sheets (In thousands) January 19, 2003 and September 29, 2002 Assets 2003 2002 Current assets: Cash and cash equivalents $ 44,536 $ 12,646 Trade accounts receivable 39,031 30,888 Merchandise inventories 116,963 108,189 Prepaid expenses and other current assets 20,788 20,418 Total current assets 221,318 172,141 Property and equipment, net of accumulated depreciation and amortization 672,741 644,688 Long-term investments 2,294 4,426 Goodwill 80,548 80,548 Intangible assets, net of accumulated amortization 21,987 22,889 Other assets 15,373 15,509 Net assets of discontinued operations --- 3,000 $1,014,261 $ 943,201 Liabilities And Shareholders"" Equity 2003 2002 Current liabilities: Current installments of long-term debt and capital lease obligations $ 5,793 $ 5,789 Trade accounts payable 64,062 59,710 Accrued payroll, bonus and employee benefits 58,404 59,359 Other accrued expenses 75,007 51,440 Total current liabilities 203,266 176,298 Long-term debt and capital lease obligations, less current installments 163,654 161,952 Other long-term liabilities 15,752 15,865 Total liabilities 382,672 354,115 Shareholders"" equity: Common stock, no par value, 150,000 and 100,000 shares authorized; 58,649 and 57,988 shares issued; 58,354 and 57,739 shares outstanding in 2003 and 2002, respectively. 358,082 341,940 Accumulated other comprehensive income 302 (422) Retained earnings 273,205 247,568 Total shareholders"" equity 631,589 589,086 Commitments and contingencies $1,014,261 $ 943,201 Whole Foods Market, Inc. Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) Sixteen weeks ended January 19, January 20, 2003 2002 Cash flows from operating activities Net income $ 25,637 $ 20,141 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 28,768 25,558 Net loss on disposal of fixed assets 144 412 Rent differential 94 762 Change in LIFO reserve 1,000 1,000 Interest accretion on long-term debt 2,265 2,132 Tax benefit related to exercise of employee stock options 5,435 6,558 Impairment loss on long-term investments 1,412 --- Issuance of common stock to 401(k) plan 3,119 --- Net change in current assets (17,843) (4,618) Net change in current liabilities 20,878 10,971 Net cash provided by operating activities 70,909 62,916 Cash flows from investing activities Development costs of new store locations (31,700) (27,605) Other property, plant and equipment expenditures (26,986) (19,202) Acquisition of intangible assets --- (1,241) Proceeds from conversion of long- term investments 1,000 -- - Proceeds from sale of property, plant and equipment 2,614 --- Payment for purchase of acquired entities, net of cash acquired --- (34,847) Other investing activities --- (4,753) Net cash used in investing activities (55,072) (87,648) Cash flows from financing activities Net proceeds from long-term borrowings --- 32,000 Issuance of common stock 12,999 22,030 Payments on long-term debt and capital lease obligations (535) (35,150) Net cash provided by financing activities 12,464 18,880 Cash flows from discontinued operations Net cash provided by discontinued operations 3,589 14,558 Net increase in cash and cash equivalents 31,890 8,706 Cash and cash equivalents at beginning of period 12,646 1,843 Cash and cash equivalents at end of period $ 44,536 $ 10,549 Supplemental disclosure of cash flow information: Interest paid $ 1,558 $ 1,968 Federal and state income taxes paid $ 1,112 $ 4,146 Contact: Cindy McCann VP of Investor Relations 512.477.4455
Cindy McCann VP of Investor Relations 512.477.4455