Exhibit 99.1
Whole Foods Market Reports Third Quarter Results
Sales Increase 15% Driven by 11% Square Footage Growth and 7.6% Comparable
Store Sales Growth; Company Ends Quarter With $131 Million in Cash
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 www.wholefoodsmarket.com . The audio web cast will be archived
for thirty days.
AUSTIN, Texas, July 30 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) 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)
(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
SOURCE Whole Foods Market, Inc.
-0- 07/30/2003
/CONTACT: Cindy McCann, VP of Investor Relations of Whole Foods Market,
Inc., +1-512-477-4455/
/Web site: http://www.wholefoodsmarket.com
http://www.wholefoodsmarket.com/investor/Q303chart.html /
(WFMI)
CO: Whole Foods Market, Inc.
ST: Texas
IN: FOD REA SUP
SU: ERN CCA MAV ERP