31.7.2003: Meldung: Whole Foods Market Reports Third Quarter Results
The Company will host a conference call today to discuss this earnings announcement at 4:00 p.m. CDT. The dial in number is 1-800-362-0571 and the conference ID is ""Whole Foods."" A replay will be available for approximately 48 hours at 402-220-2985. A simultaneous audio web cast will also be available at http://www.wholefoodsmarket.com/ . The audio web cast will be archived for thirty days.
Whole Foods Market, Inc. today reported sales and earnings for the third quarter ended July 6, 2003. Sales for the 12-week period increased 15% to $749 million. This increase was driven by 11% weighted average year-over-year square footage growth and comparable store sales growth of 7.6%. The Company estimates the Easter shift, from the second quarter last year to the third quarter this year, positively impacted this quarter""s comps by approximately 50 basis points. Sales in identical stores (excluding one relocated store and two major store expansions) increased 7.0% for the quarter.
"We are pleased with our 7.6% comparable store sales increase during the quarter given our tough 10.5% comparison in the prior year. These results are consistent with our 18% two-year average comp for the past four years," said John Mackey, Chairman, President and Chief Executive Officer of Whole Foods Market. "All three Harry""s Farmers Market stores showed positive comps for the third quarter, and we now expect them to have a slightly positive impact on our comparable store sales in the fourth quarter. We are seeing a slight improvement in our overall comparable store sales growth, which has averaged 8% over the last six weeks."
On October 11, 2002, United Natural Foods acquired Blooming Prairie Cooperative, a cooperative natural foods distributor in which the Company was a member, for cash consideration of $30 million. Blooming Prairie Cooperative distributed 90% of the proceeds from the sale to its former members during the third quarter; 10% of the proceeds were retained for future contingencies. The Company has recognized a pre-tax gain included in investment and other income of approximately $3 million, or approximately $0.03 in diluted earnings per share, as a result of this distribution. Any further distributions from Blooming Prairie Cooperative will be accounted for if and when received.
Net income for the quarter increased 30% to $28.7 million from $22.1 million in the prior year, and diluted earnings per share increased 26% to $0.45 compared to $0.36 in the prior year. Excluding the Blooming Prairie gain, adjusted net income for the quarter increased 22% to $26.9 million, and adjusted diluted earnings per share increased 18% to $0.42.
For the forty-week period ended July 30, 2003, sales increased 17% to $2.4 billion, with sales in comparable stores increasing 8.5% and sales in identical stores increasing 8.0%. Net income year to date increased 28% to $79.9 million, or $1.28 per share, from $62.4 million, or $1.04 per share in the prior year. Excluding the Blooming Prairie gain, adjusted net income year to date increased 25% to $78.1 million, and adjusted diluted earnings per share increased 20% to $1.25.
For the quarter, net operating profit after taxes (NOPAT) increased 29% to $30.3 million. The Company""s capital charge for the quarter was $28.8 million, resulting in Economic Value Added (EVA) of $1.5 million, a $2.6 million improvement over the prior year.
Store returns for the third quarter: # of Average Average NOPAT Comp Size Comps ROIC Stores Stores over eight years old 27,200 5.7% 54% 52 Stores between five and eight years old 28,600 5.2% 52% 35 Stores between two and five years old 36,500 9.5% 22% 33 Stores less than two years old (including relocations) 35,700 21.4% 5% 13 All stores in comparable store base 30,700 7.6% 33% 133 All stores open at the end of the third quarter 31,000 29% 144
Gross profit in the third quarter increased 14% to $258.6 million, or 34.5% of sales, from $226.1 million, or 34.9% of sales, in the prior year. Gross profit as a percentage of sales decreased 33 basis points primarily due to higher occupancy costs, including utilities, repairs and rent. Direct store expenses increased 16% to $186.9 million from $161.4 million in the prior year, an increase of seven basis points as a percentage of sales. Store contribution increased 11% to $71.7 million from $64.7 million in the prior year, a decrease of 41 basis points as a percentage of sales. General and administrative (G&A) expenses increased 4% to $23.9 million compared to $22.9 million in the prior year, an improvement of 34 basis points as a percentage of sales.
For the 133 stores in the comparable store base, a 14 basis point improvement in direct store expenses was offset by a 16 basis point decrease in gross profit, resulting in a two basis point decrease in store contribution to 10.0% of sales.
For the quarter, the Company produced cash flow from operations of $64 million. Capital expenditures for the quarter were $36 million of which $18 million was for new store development. At the end of the quarter, the Company had approximately $131 million in cash and approximately $167 million in long-term debt. Long-term debt includes $150 million in Zero Coupon Convertible Debentures. For the fourth consecutive quarter, the Company has had no amounts drawn on its line of credit.
In the third quarter, the Company opened one new store in Sacramento, CA, ending the quarter with 144 stores. Total square footage open at the end of the third quarter was approximately 4.5 million. Due to some last minute permitting delays, the Company""s new store in Santa Monica opened on July 16th instead of during the third quarter as originally anticipated. The Company has recently signed leases for five new stores in Chevy Chase, MD; Charlottesville, VA; Baton Rouge, LA; New Orleans, LA; and Atlanta, GA. The Company currently has 29 stores in development averaging 45,000 square feet in size. Square footage under development totals approximately 1.3 million square feet.
Following are certain historical results for all stores for the past four fiscal years as well as year to date for the current fiscal year including gross profit, direct store expenses, store contribution, and general and administrative expenses (G&A) excluding goodwill amortization in all years, as a percentage of sales. One-year comparable store sales increases and the sum of two years of comparable store sales increases (two-year comps) are also included.
1999 2000 2001 2002 2003YTD Gross profit 34.0% 34.5% 34.8% 34.7% 34.3% Direct store expenses 24.4% 25.0% 25.3% 25.1% 25.1% Store contribution 9.6% 9.4% 9.5% 9.6% 9.2% G&A (excl. goodwill) 3.9% 3.3% 3.6% 3.6% 3.2% Comps 7.7% 8.6% 9.2% 10.0% 8.5% Two-year comps 18.7% 16.3% 17.8% 19.2% 18.5% Goals for fiscal year 2003:
For fiscal year 2003, the Company expects sales growth to be at the low end of the 15% to 20% range. In the fourth quarter, the Company is up against two years of over 10% comparable sales increases, and comparable store sales growth is expected to be in the range of 6.5% to 8.5%. The Company expects weighted average square footage growth of 11% for the year, including expansions of existing stores. Including Santa Monica, the Company expects to open three stores in the fourth quarter, one of which will be a relocation of an existing 17,600 square foot store location to a new 51,300 square foot store location.
The Company expects gross profit for the fiscal year to be lower as a percentage of sales compared to the prior year based on year to date results and a difficult LIFO comparison in the fourth quarter. The Company had a $3.4 million LIFO credit in the fourth quarter of last year and expects to record a charge in the fourth quarter of this year. The Company expects an improvement in operating margin driven by lower general and administrative expenses and pre-opening expenses as a percentage of sales. Pre-opening and relocation expense is expected to be approximately $10 million.
Capital expenditures for the year are expected to be in the range of $160 million to $180 million. The Company expects net interest expense for the year to be between $5 million and $6 million. This includes the $1.4 million pre-tax impairment charge to the Company""s Gaiam, Inc. investment in the first quarter but excludes the $3.0 million pre-tax gain from the Blooming Prairie sale in the third quarter.
The Company expects fourth quarter diluted earnings per share to be in the range of $0.38 to $0.39. Excluding the $0.03 diluted earnings per share gain from the sale of Blooming Prairie, the Company expects diluted earnings per share for the fiscal year to be at the lower end of the $1.62 to $1.69 range. The Company""s guidance includes the pre-tax impairment charge of $1.4 million, or $0.01 in diluted earnings per share, taken in the first quarter relating to the Company""s investment in Gaiam, Inc. but does not include any potential further impairment charge relating to this investment.
Goals for fiscal year 2004:
For fiscal year 2004, the Company expects total sales growth to be at the low end of the 15% to 20% range. The Company expects comparable store sales growth of 7% to 9% and weighted average square footage growth of 10% to 11% relating to the opening of 12 to 15 new stores. While the Company has built a strong pipeline of new stores, it will take some time before these stores start to open. Therefore, the Company does not foresee an acceleration in new store openings until late in the fiscal year. Square footage growth is expected to be higher in the second half of the fiscal year given the projected timing of new store openings. The Company expects diluted earnings per share of $1.87 to $1.95. The Company will give more detailed forward- looking guidance for the 2004 fiscal year when it releases fourth quarter and fiscal year 2003 results in mid-November.
Supplemental Information: The Company has included a pie chart available at http://www.wholefoodsmarket.com/investor/Q303chart.html that depicts net income and certain expense categories, including salaries and benefits, as a percentage of sales for the twelve weeks ended July 6, 2003.
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides information regarding adjusted net income, adjusted diluted earnings per share, and EVA in the press release as additional information for its operating results. These measures are not in accordance with, or an alternative for, GAAP. The Company""s management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company and for budget planning purposes. The following tables reflect reconciliations of GAAP information to Non-GAAP measures:
Twelve weeks ended Forty weeks ended July 6, 2003 July 7, 2002 July 6, 2003 July 7, 2002 GAAP Net income $ 28,672 $ 22,080 $ 79,875 $ 62,448 Blooming Prairie gain (3,020) --- (3,020) --- Income taxes (40%) 1,208 --- 1,208 --- Adjusted net income 26,860 22,080 78,063 62,448 Interest on convertible debentures, net 1,042 983 3,429 3,250 Adjusted net income, diluted $ 27,902 $ 23,063 $ 81,492 $ 65,698 Adjusted diluted earnings per share $0.42 $0.36 $1.25 $1.04 Weighted average shares outstanding, diluted 65,811 64,213 65,180 63,113 Twelve weeks ended Forty weeks ended July 6, 2003 July 7, 2002 July 6, 2003 July 7, 2002 GAAP Net income $ 28,672 $ 22,080 $ 79,875 $ 62,448 Provision for income taxes 19,115 14,720 53,250 41,632 Interest expense and other 2,768 2,513 8,475 11,727 NOPBT 50,555 39,313 141,600 115,807 Taxes (40%) 20,222 15,725 56,640 46,323 NOPAT 30,333 23,588 84,960 69,484 Capital charge 28,808 24,667 90,374 79,426 EVA $ 1,525 $ (1,079) $ (5,414) $ (9,942) 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 145 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.
Contact: Cindy McCann VP of Investor Relations 512.477.4455 Whole Foods Market, Inc. Condensed Consolidated Income Statements (unaudited) (In thousands except per share amounts) Twelve weeks ended Forty weeks ended July 6, July 7, July 6, July 7, 2003 2002 2003 2002 Sales $ 749,043 $ 648,763 $2,397,942 $2,052,351 Cost of goods sold and occupancy costs 490,424 422,618 1,574,804 1,343,385 Gross profit 258,619 226,145 823,138 708,966 Direct store expenses 186,918 161,409 601,358 512,854 Store contribution 71,701 64,736 221,780 196,112 General and administrative expenses 23,930 22,919 78,395 74,080 Pre-opening and relocation costs 2,369 3,273 8,156 10,894 Operating income 45,402 38,544 135,229 111,138 Other income (expense): Interest expense (1,907) (2,195) (6,493) (8,637) Investment and other income 4,292 451 4,389 1,579 Income before income taxes 47,787 36,800 133,125 104,080 Provision for income taxes 19,115 14,720 53,250 41,632 Net income $ 28,672 $ 22,080 $ 79,875 $ 62,448 Basic earnings per share $ 0.48 $ 0.39 $ 1.36 $ 1.11 Weighted average shares outstanding 59,752 57,113 58,749 56,022 Diluted earnings per share $ 0.45 $ 0.36 $ 1.28 $ 1.04 Weighted average shares outstanding, diluted basis 65,811 64,213 65,180 63,113 A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in thousands): Twelve weeks ended Forty weeks ended July 6, July 7, July 6, July 7, 2003 2002 2003 2002 Net income (numerator for basic earnings per share) $ 28,672 $ 22,080 $ 79,875 $ 62,448 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 1,042 983 3,429 3,250 Adjusted net income (numerator for diluted earnings per share) $ 29,714 $ 23,063 $ 83,304 $ 65,698 Weighted average common shares outstanding (denominator for basic earnings per share) 59,752 57,113 58,749 56,022 Potential common shares outstanding: Assumed conversion of 5% zero coupon convertible subordinated debentures 3,285 3,286 3,285 3,286 Assumed exercise of stock options 2,774 3,814 3,146 3,805 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 65,811 64,213 65,180 63,113 Basic earnings per share $ 0.48 $ 0.39 $ 1.36 $ 1.11 Diluted earnings per share $ 0.45 $ 0.36 $ 1.28 $ 1.04 Whole Foods Market, Inc. Condensed Consolidated Balance Sheets July 6, 2003 (unaudited) and September 29, 2002 (In thousands) Assets 2003 2002 Current assets: Cash and cash equivalents $ 131,035 $ 12,646 Trade accounts receivable 47,801 30,888 Merchandise inventories 124,398 108,189 Prepaid expenses and other current assets 27,581 20,418 Total current assets 330,815 172,141 Property and equipment, net of accumulated depreciation and amortization 698,324 644,688 Long-term investments 2,246 4,426 Goodwill 80,548 80,548 Intangible assets, net of accumulated amortization 27,232 22,889 Other assets 5,790 15,509 Net assets of discontinued operations --- 3,000 $1,144,955 $ 943,201 Liabilities and Shareholders"" Equity 2003 2002 Current liabilities: Current installments of long-term debt and capital lease obligations $ 5,805 $ 5,789 Trade accounts payable 72,180 59,710 Accrued payroll, bonus and employee benefits 67,649 59,359 Other accrued expenses 75,058 51,440 Total current liabilities 220,692 176,298 Long-term debt and capital lease obligations, less current installments 161,203 161,952 Other long-term liabilities 16,317 15,865 Total liabilities 398,212 354,115 Shareholders"" equity: Common stock, no par value, 150,000 shares authorized, 60,286 and 57,988 shares issued, 59,896 and 57,739 shares outstanding in 2003 and 2002, respectively 417,417 341,940 Accumulated other comprehensive income 1,883 (422) Retained earnings 327,443 247,568 Total shareholders"" equity 746,743 589,086 Commitments and contingencies $1,144,955 $ 943,201 Whole Foods Market, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (In thousands) Forty weeks ended July 6, July 7, 2003 2002 Cash flows from operating activities: Net income $ 79,875 $ 62,448 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 74,318 65,634 Loss on disposal of fixed assets 452 2,452 Rent differential 785 622 Change in LIFO reserve 1,840 2,500 Interest accretion on long-term debt 5,632 5,395 Tax benefit related to exercise of employee stock options 24,015 21,549 Impairment loss on long-term investments 1,412 --- Issuance of common stock to 401(k) plan 3,122 --- Cooperative patronage dividends received 3,210 --- Net change in current assets (38,496) (12,166) Net change in current liabilities 48,437 38,108 Net cash provided by operating activities 204,602 186,542 Cash flows from investing activities: Development costs of new store locations (64,535) (77,412) Other property, plant and equipment expenditures (64,346) (39,035) Acquisition of intangible assets (6,552) (1,241) Payments for purchase of acquired entities, net of cash acquired --- (36,105) Proceeds from sale of property, plant and equipment 2,709 --- Proceeds from conversion of long-term investments 1,000 --- Other investing activities --- (4,753) Net cash used in investing activities (131,724) (158,546) Cash flows from financing activities: Net proceeds from long-term borrowings --- 32,000 Payments on long-term debt and capital lease obligations (6,341) (123,956) Issuance of common stock 48,295 64,092 Net cash provided by (used in) financing activities 41,954 (27,864) Cash flows from discontinued operations: Net cash provided by discontinued operations 3,557 14,232 Net increase in cash and cash equivalents 118,389 14,364 Cash and cash equivalents at beginning of period 12,646 1,843 Cash and cash equivalents at end of period $ 131,035 $ 16,207 Supplemental disclosures of cash flow information: Interest paid $ 2,015 $ 3,665 Federal and state income taxes paid $ 8,136 $ 18,537 .
For more information, contact:
Michael Duffield / Whole Foods Market at 512/477-4455 ext. 3060 or
or Greer Bautz / Cone, Inc. at 617/227-2111 or firstname.lastname@example.org