Exhibit 99.1
Whole Foods Market Reports Fourth Quarter and Fiscal Year Results
and Declares First Dividend
Sales for the Quarter Increase 18%, With 8.8% Comparable Store Sales Growth;
Sales for the Fiscal Year Top $3 Billion
The Company will host a conference call today to discuss this earnings
announcement at 4:00 p.m. CST. The dial in number is 1-800-362-0574 and the
conference ID is 'Whole Foods.' A replay will be available for approximately
48 hours at 1-402-530-0417. 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, Nov. 12 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported sales and earnings for the fourth quarter and
fiscal year ended September 28, 2003. Sales for the 12-week quarter increased
18% to $751 million from $638 million in the prior year. This increase was
driven by 10% weighted average year-over-year square footage growth and
comparable store sales growth of 8.8%. Sales in identical stores (excluding
one relocated store and two major store expansions) increased 8.3% for the
quarter. Sales for the fiscal year increased 17% to $3.1 billion from
$2.7 billion in the prior year, with 11% weighted average year-over-year
square footage growth, comparable store sales growth of 8.6%, and identical
store sales growth (excluding three relocated stores and two major store
expansions) of 8.1%.
Net income for the quarter increased 8% to $23.8 million from
$22.0 million in the prior year, and diluted earnings per share increased 5%
to $0.38 from $0.36 in the prior year. This was in line with the Company's
$0.38 to $0.39 range of guidance. Net income for the fiscal year increased
23% to $103.7 million, or $1.66 per share, from $84.5 million, or $1.40 per
share in the prior year. Net income and earnings per share for the fiscal
year include a pre-tax gain in the third quarter of approximately
$3.0 million, or $0.03 in diluted earnings per share, related to the
distribution of proceeds from the sale of Blooming Prairie Cooperative, a
cooperative natural foods distributor in which the Company was a member.
Excluding this gain, adjusted net income for the fiscal year increased 21% to
$101.9 million, and adjusted diluted earnings per share increased 16% to
$1.63.
"Last year we spoke of three challenges that we saw for Whole Foods Market
in fiscal year 2003. These challenges included continuing to improve our
operations, increasing our store development pipeline, and successfully
integrating the Harry's stores into our company," said John Mackey, Chairman,
President and Chief Executive Officer of Whole Foods Market. "In a year that
was full of unusual events ranging from the outbreak of war, continued
weakness in the economy, extreme weather across various parts of the country,
and a blackout in the Northeast, we are pleased to have met these challenges
and achieved such strong results for our shareholders. We produced an 8.6%
increase in comparable store sales on top of a difficult 10.0% comparison in
the prior year. We signed 29 leases, increasing our development pipeline to
35 stores and a record 1.6 million square feet, an increase of over 85%
compared to this time last year. Our Harry's stores are comping above the
overall company average reflecting the success of our remodeling efforts as
well as the implementation of our culture and empowerment systems in those
stores. In addition, we produced cash flow from operations of $280 million,
ending the year with approximately $166 million in cash. As an EVA company
that believes in maximizing returns on capital to our shareholders, we are
proud to announce the commencement of our first quarterly dividend of fifteen
cents per share."
For the quarter, net operating profit after taxes (NOPAT) increased 11% to
$25.8 million. The Company's capital charge for the quarter was
$29.9 million, resulting in Economic Value Added (EVA) of negative
$4.1 million compared to negative $1.1 million in the prior year. For the
fiscal year, EVA improved $1.5 million to negative $9.5 million.
Store returns for the fourth quarter:
# of
Average Average NOPAT Comp
Size Comps ROIC Stores
Stores over eight years old 27,400 7.5% 51% 52
Stores between five and eight years old 29,100 5.3% 47% 34
Stores between two and five years old 36,400 11.4% 20% 35
Stores less than two years old
(including relocations) 35,900 18.9% 7% 13
All stores in comparable store base 31,000 8.8% 30% 134
All stores open at the end of the
fourth quarter 31,300 27% 145
Gross profit in the fourth quarter increased 15% to $258 million, or 34.3%
of sales, from $224 million, or 35.1% of sales, in the prior year. As a
percentage of sales, gross profit decreased 84 basis points. The decrease was
primarily due to a $3.4 million LIFO inventory credit in the fourth quarter
last year compared to a charge of $159,000 in the fourth quarter this year, a
negative impact of 55 basis points. Gross profit was also negatively impacted
by approximately 16 basis points due to product losses at the Company's ten
stores affected by the blackout in the Northeast and nine stores affected by
Hurricane Isabel, as well as inventory markdowns and losses related to the
relocation of two stores in Ann Arbor, Michigan. Direct store expenses
increased 17% to $191 million, or 25.5% of sales, from $163 million in the
prior year, an improvement of six basis points as a percentage of sales. In
total, the Company incurred approximately $1 million, or $0.01 in diluted
earnings per share, of product losses, additional labor and other expenses
related to the Northeast blackout and Hurricane Isabel. Store contribution
increased 8% to $66 million, or 8.8% of sales, from $61 million in the prior
year, a decline of 78 basis points as a percentage of sales. General and
administrative (G&A) expenses increased 2% to $22 million, or 3.0% of sales,
an improvement of 45 basis points as a percentage of sales.
For the 134 stores in the comparable store base, a 37 basis point
improvement in direct store expenses to 25.1% of sales was offset by an
86 basis point decrease in gross profit to 34.3% of sales, resulting in a
49 basis point decrease in store contribution to 9.1% of sales.
Capital expenditures in the quarter were $44 million of which $24 million
was for new store development. Capital expenditures for the year were
$173 million of which $89 million was for new store development. The Company
produced cash flow from operations of $75 million during the quarter and
$280 million during the year. At the end of the fiscal year, the Company had
approximately $166 million in cash and approximately $169 million in long-term
debt. Long-term debt includes $151 million in Zero Coupon Convertible
Debentures due in 2018. The Company has no amounts drawn on its $100 million
line of credit.
In the fourth quarter, the Company opened two new stores in Santa Monica,
CA and Las Vegas, NV and relocated two smaller stores in Ann Arbor, MI to a
new 51,000 square foot store, ending the year with 145 stores and total square
footage of approximately 4.5 million. The Company has recently signed leases
for eight new stores, one each in Redwood City, CA; Red Bank, NJ; West
Hartford, CT; Denver, CO; Brooklyn, NY; Oakland, CA, and two in Chicago, IL.
The Company currently has 35 stores in development averaging 45,000 square
feet in size. Square footage under development is a record 1.6 million.
In late September, Team Members at the Company's Madison, Wisconsin
store presented a petition to the Company requesting that the United
Food and Commercial Workers (UFCW) no longer be considered their
official bargaining representative. As a result, the National Labor
Relations Board (NLRB) scheduled a November 17th vote for the store's
full Team Member base to decide whether the UFCW would represent them.
With the vote scheduled, Madison Team Members then presented a second
petition with sufficient signatures to allow the Company to legally
withdraw recognition from the union without holding the scheduled vote.
Although Whole Foods Market and the UFCW had consented to an election
and had entered into an election agreement with the NLRB, the UFCW filed
Unfair Labor Practice charges against the Company on November 7th,
effectively blocking the vote from occurring in November or in the near
future. The Company believes these charges, like the many others filed
by the union, are baseless and ultimately will be dismissed. In light
of this significant change of circumstances, the Company has decided
that the best way to respect the wishes of its Team Members in Madison
is now to withdraw recognition from the union, and the Company has done
so as of today. It is possible for the UFCW to attempt to challenge
this decision, but the Company fully expects to put this brief period of
unionization in its history behind it and move on together with a
renewed sense of cooperation and shared vision.
Following are certain historical results for all stores for the last five
fiscal years 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. Total sales growth, one-
year comparable store sales increases and the sum of two years of comparable
store sales increases (two-year comps) are also included. Comps and two-year
comps for the last five years are calculated by taking an average of the five
years.
Last 5
1999 2000 2001 2002 2003 Years
Gross profit 34.0% 34.5% 34.8% 34.7% 34.3% 34.5%
Direct store expenses 24.4% 25.0% 25.3% 25.1% 25.2% 25.1%
Store contribution 9.6% 9.4% 9.5% 9.6% 9.2% 9.4%
G&A (excl. goodwill amort.) 3.9% 3.3% 3.6% 3.6% 3.2% 3.5%
Sales growth 14.1% 23.2% 23.6% 18.4% 17.0% 19.2%
Comps 7.7% 8.6% 9.2% 10.0% 8.6% 8.8%
Two-year comps 18.7% 16.3% 17.8% 19.2% 18.6% 18.1%
Goals for fiscal year 2004:
The Company expects total sales growth for fiscal year 2004 to be in the
range of 15% to 20%, with weighted average year-over-year square footage
growth of 10% to 11% and comparable store sales growth of 8% to 10%. The
Company previously expected comparable store sales growth of 7% to 9% for the
year. Square footage growth includes 41,000 square feet related to the
expansion of six existing stores and is expected to be higher in the second
half of the fiscal year, as the Company expects to open three or four new
stores in the first half of the year and nine to 11 new stores during the
remainder of the year, including the relocation of an existing store.
The Company is currently in the seventh week of its sixteen-week first
quarter. During the second week of the quarter, labor unions at several major
supermarkets in Southern California went on strike. The Company has 19 stores
with sales benefiting from the strike, 17 of which are in the comparable store
base. For the first six weeks of the first quarter, comparable store sales
growth averaged 13.7% in all stores and just over 11% excluding stores
positively impacted by the strike. It is difficult to forecast the eventual
impact of the strike on sales and comps for the quarter, as the Company does
not have relevant data on which to rely and much depends on the duration of
the strike. The Company has already seen the positive sales benefit lessen in
degree when the union stopped picketing at Kroger's Ralph's stores two weeks
ago. Based on the best information the Company has available today and the
difficult 10.5% comparison in the prior year, the Company is initiating a
guidance range for first quarter comparable store sales growth of 9.5% to
12.5%, including the estimated positive impact from the strike.
The Company expects to produce operating margin improvement in fiscal year
2004 primarily through slight improvements in gross profit, direct store
expenses and G&A as a percentage of sales. Pre-opening and relocation expense
is expected to be in the range of $10 million to $12 million, more heavily
weighted in the second half of the year.
Capital expenditures are expected to be in the range of $210 million to
$240 million for the year. The Company does not expect any borrowings on its
$100 million credit line for the year. The Company expects interest expense,
net of investment and other income, to be in the range of $3 million to
$4 million.
The Company is initiating diluted earnings per share guidance for the
first quarter of $0.56 to $0.58, an expected year-over-year increase of
approximately 33% to 38%. This above-average increase is due to the Company's
expectations of a positive benefit from the strike, a positive contribution
from the three Harry's stores compared to a loss in the prior year, and lower
pre-opening expenses. Additionally, this year's first quarter guidance does
not include any potential impairment of or loss related to the Company's
remaining $2.2 million investment in Gaiam, Inc., whereas the prior year's
first quarter included a pre-tax impairment charge of $1.4 million, or $0.01
in diluted earnings per share. For the full year, the Company is raising its
previously stated guidance for diluted earnings per share to $1.88 to $1.96
from $1.87 to $1.95.
Supplemental Information: The following pie chart depicts net income and
certain expense categories, including salaries and benefits, as a percentage
of sales for the twelve weeks ended September 28, 2003.
http://www.wholefoodsmarket.com/investor/Q403chart.html
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 to, 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 the Company's 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 table reflects reconciliations of GAAP information to
non-GAAP measures.
Twelve weeks ended Fifty-two weeks ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
GAAP net income $23,812 $22,043 $103,687 $84,491
Blooming Prairie gain --- --- (3,020) ---
Income taxes (40%) --- --- 1,208 ---
Adjusted net income 23,812 22,043 101,875 84,491
Interest on convertible
debentures, net 1,052 1,002 4,481 4,272
Adjusted net income, diluted $24,864 $23,045 $106,356 $88,763
Adjusted diluted earnings
per share $0.38 $0.36 $1.63 $1.40
Twelve weeks ended Fifty-two weeks ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
GAAP net income $23,812 $22,043 $103,687 $84,491
Provision for income taxes 15,876 14,695 69,126 56,327
Interest expense and other 3,348 1,958 11,823 13,685
NOPBT 43,036 38,696 184,636 154,503
Taxes (40%) (17,214) (15,478) (73,854) (61,801)
NOPAT 25,822 23,218 110,782 92,702
Capital charge (29,883) (24,294) (120,257) (103,720)
EVA $(4,061) $(1,076) $(9,475) $(11,018)
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 2003, the Company had sales of
$3.1 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, which could
cause our actual results to differ materially from those described in the
forward looking statements. These risks include but are 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.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Twelve weeks ended Fifty-two weeks ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
Sales $ 750,651 $ 638,124 $ 3,148,593 $ 2,690,475
Cost of goods sold
and occupancy costs 493,135 413,828 2,067,939 1,757,213
Gross profit 257,516 224,296 1,080,654 933,262
Direct store expenses 191,178 162,906 792,536 675,760
Store contribution 66,338 61,390 288,118 257,502
General and
administrative
expenses 22,298 21,791 100,693 95,871
Pre-opening and
relocation costs 3,935 1,591 12,091 12,485
Operating income 40,105 38,008 175,334 149,146
Other income (expense):
Interest expense (1,621) (1,747) (8,114) (10,384)
Investment and other
income 1,204 477 5,593 2,056
Income before
income taxes 39,688 36,738 172,813 140,818
Provision for
income taxes 15,876 14,695 69,126 56,327
Net income $ 23,812 $ 22,043 $ 103,687 $ 84,491
Basic earnings
per share $ 0.40 $ 0.38 $ 1.76 $ 1.50
Weighted average
shares outstanding 59,989 57,602 59,035 56,385
Diluted earnings
per share $ 0.38 $ 0.36 $ 1.66 $ 1.40
Weighted average
shares outstanding,
diluted basis 65,827 64,099 65,330 63,340
A reconciliation of the numerators and denominators of the basic
and diluted earnings per share calculations follows (in thousands):
Twelve weeks ended Fifty-two weeks ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
Net income (numerator
for basic earnings
per share) $ 23,812 $ 22,043 $ 103,687 $ 84,491
Interest on 5% zero
coupon convertible
subordinated
debentures, net of
income taxes 1,052 1,002 4,481 4,272
Adjusted net income
(numerator for
diluted earnings
per share) $ 24,864 $ 23,045 $ 108,168 $ 88,763
Weighted average
common shares
outstanding
(denominator for
basic earnings
per share) 59,989 57,602 59,035 56,385
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 2,553 3,211 3,010 3,669
Weighted average
common shares
outstanding and
potential additional
common shares
outstanding
(denominator for
diluted earnings
per share) 65,827 64,099 65,330 63,340
Basic earnings
per share $ 0.40 $ 0.38 $ 1.76 $ 1.50
Diluted earnings
per share $ 0.38 $ 0.36 $ 1.66 $ 1.40
Whole Foods Market, Inc.
Consolidated Balance Sheets
(In thousands)
September 28, 2003 and September 29, 2002
Assets
2003 2002
Current assets:
Cash and cash equivalents $ 165,779 $ 12,646
Trade accounts receivable 45,947 30,888
Merchandise inventories 123,904 108,189
Prepaid expenses and other current assets 12,447 8,950
Deferred income taxes 15,607 11,468
Total current assets 363,684 172,141
Property and equipment, net of accumulated
depreciation and amortization 718,240 644,688
Long-term investments 2,206 4,426
Goodwill 80,548 80,548
Intangible assets, net of accumulated amortization 26,569 22,889
Deferred income taxes --- 7,350
Other assets 5,573 8,159
Net assets of discontinued operations --- 3,000
$ 1,196,820 $ 943,201
Liabilities and Shareholders' Equity
2003 2002
Current liabilities:
Current installments of long-term debt
and capital lease obligations $ 5,806 $ 5,789
Trade accounts payable 72,715 59,710
Accrued payroll, bonus and employee benefits 70,875 59,359
Other accrued expenses 90,188 51,440
Total current liabilities 239,584 176,298
Long-term debt and capital lease obligations,
less current installments 162,909 161,952
Deferred rent liability 13,349 12,091
Other long-term liabilities 2,301 3,774
Deferred income taxes 2,501 ---
Total liabilities 420,644 354,115
Shareholders' equity:
Common stock, no par value, 150,000 shares
authorized, 60,299 and 57,988 shares issued,
60,070 and 57,739 shares outstanding in
2003 and 2002, respectively 423,297 341,940
Accumulated other comprehensive income 1,624 (422)
Retained earnings 351,255 247,568
Total shareholders' equity 776,176 589,086
Commitments and contingencies
$ 1,196,820 $ 943,201
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Fifty-two weeks ended
September 28, September 29,
2003 2002
Cash flows from operating activities:
Net income $ 103,687 $ 84,491
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 97,986 85,869
Loss on disposal of fixed assets 771 3,138
Deferred income taxes 5,712 10,018
Rent differential 1,258 437
Change in LIFO reserve 1,999 (889)
Interest accretion on long-term debt 7,339 7,048
Tax benefit related to exercise of
employee stock options 25,918 23,890
Impairment loss on long-term investments 1,412 ---
Lease termination costs (435) (502)
Issuance of common stock to 401(k) plan 3,125 4,475
Cooperative patronage dividends received 3,210 100
Net change in current assets and liabilities:
Trade accounts receivable (15,209) (6,115)
Merchandise inventories (17,714) (3,096)
Prepaid expenses and other
current assets (2,222) 194
Trade accounts payable 13,005 5,859
Accrued payroll, bonus
and employee benefits 11,516 17,609
Other accrued expenses 38,605 (3,381)
Net cash provided by operating activities 279,963 229,145
Cash flows from investing activities:
Development costs of new store locations (89,007) (100,000)
Other property, plant
and equipment expenditures (84,103) (61,385)
Acquisition of intangible assets (6,456) (1,241)
Payments for purchase of acquired
entities, net of cash acquired --- (35,978)
Proceeds from sale of property,
plant and equipment 2,763 ---
Proceeds from conversion of
long-term investments 1,000 ---
Other investing activities --- (4,753)
Net cash used in investing activities (175,803) (203,357)
Cash flows from financing activities:
Net proceeds from long-term borrowings --- 32,000
Payments on long-term debt and capital
lease obligations (6,341) (127,956)
Issuance of common stock 52,270 66,964
Net cash provided by (used in)
financing activities 45,929 (28,992)
Cash flows from discontinued operations:
Net cash provided by discontinued operations 3,044 14,007
Net increase in cash and cash equivalents 153,133 10,803
Cash and cash equivalents
at beginning of period 12,646 1,843
Cash and cash equivalents at end of period $ 165,779 $ 12,646
Supplemental disclosures
of cash flow information
Interest and income taxes paid:
Interest $ 2,084 $ 5,224
Federal and state income taxes $ 16,375 $ 26,030
SOURCE Whole Foods Market, Inc.
-0- 11/12/2003
/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/Q403chart.html /
(WFMI)
CO: Whole Foods Market, Inc.
ST: Texas
IN: FOD REA SUP
SU: ERN DIV ERP CCA MAV