Exhibit 99.1
Whole Foods Market Announces Second Quarter Results
Sales Increase 24% and Diluted EPS Increase 32% to $0.54;
Record-High 17.1% Comparable Store Sales Growth;
Company Raises 2004 Sales and EPS Guidance
The Company will host a conference call today to discuss this earnings
announcement at 4:00 p.m. CDT. The dial in number is 1-800-795-1259 and the
conference ID is 'Whole Foods.' A replay will be available for approximately
48 hours at 1-402-220-2988. A simultaneous audio webcast will also be
available at www.wholefoodsmarket.com. The audio webcast will be archived
for thirty days.
AUSTIN, Texas, May 4 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported sales and earnings for the second quarter ended
April 11, 2004. Sales for the 12-week quarter increased 24% to $902 million
from $725 million in the prior year. This increase was driven by 7% weighted
average year-over-year square footage growth and comparable store sales growth
of 17.1%. Sales in identical stores (excluding one relocated store and one
major store expansion) increased 17.0% for the quarter.
The Company's historical average comparable store sales growth is as
follows:
Last Ten Last Five Last Three Last Four Last Two
Years Years Years Quarters Quarters
FY94-FY03 FY99-FY03 FY01-FY03 3Q03-2Q04 FY04 YTD
8.5% 8.8% 9.3% 12.4% 15.8%
The Company has historically produced comparable store sales growth well
above the supermarket industry average and has shown accelerating trends over
the last ten years as natural and organic products have entered the mainstream
consciousness, as the Company's execution has improved and as its brand equity
has increased. The Company attributes its record-breaking 17.1% comparable
store sales growth in the second quarter to these factors as well as to: (1)
a below-average 7.0% comparable store sales increase in the prior year which
was due to several factors including severe weather and the negative Easter
shift and (2) a positive 70 basis point impact from the strike in Southern
California. Excluding the stores positively impacted by the strike,
comparable store sales increased 16.4% for the quarter.
Net income for the quarter increased 38% to $35.3 million, or 3.9% of
sales, from $25.6 million, or 3.5% of sales, in the prior year. Diluted
earnings per share increased 32% to $0.54 from $0.41 in the prior year. Net
operating profit after taxes (NOPAT) increased 37% to $37.2 million for the
quarter. The Company's capital charge for the quarter was $29.5 million,
resulting in Economic Value Added (EVA) of $7.7 million, an improvement of
$5.0 million over the prior year.
"We produced another quarter of outstanding results with strong sales,
earnings and EVA improvement," said John Mackey, Whole Foods Market CEO,
President, Chairman and Co-founder. "We are seeing great performance from all
of our regions; however, we would like to highlight what we are seeing in
Southern California post-strike. We estimate that we have retained
approximately 30% of the sales we gained and maintained during the strike. As
customers were newly introduced or were reintroduced to our stores, a
significant percentage of them appeared to find it a more appealing shopping
experience. We are very pleased with this level of retention, as we believe
it points to the significant growing attraction of our store concept and
therefore the customer opportunity that exists in our other markets across the
country."
For the twenty-eight week period ended April 11, 2004, sales increased 23%
over the prior year to $2.0 billion, with sales in comparable stores
increasing 15.8% and sales in identical stores increasing 15.5%. Net income
year to date has increased 45% to $74.0 million, or $1.14 per share, from
$51.2 million, or $0.83 per share in the prior year. Year to date, EVA has
improved to $11.4 million from negative $782,000 in the prior year.
Store returns for the second quarter:
# of
Average Average NOPAT Comp
Size Comps ROIC Stores
Stores over eight years old 27,300 15.1% 60% 63
Stores between five and eight years old 30,900 14.3% 49% 25
Stores between two and five years old 36,500 18.6% 25% 39
Stores less than two years old
(including relocations) 35,200 28.1% 16% 15
All stores in comparable store base 31,300 17.1% 37% 142
All stores open at the end of the
second quarter 30,500 33% 156
In the second quarter, gross profit increased 99 basis points to 35.5% of
sales, and direct store expenses increased 49 basis points to 25.4% of sales,
resulting in a 50 basis point increase in store contribution to 10.0% of
sales. For the 142 stores in the comparable store base, gross profit improved
118 basis points to 35.7% of sales, and direct store expenses increased
31 basis points to 25.2% of sales, resulting in an 87 basis point increase in
store contribution to 10.4% of sales. General and administrative (G&A)
expenses increased 24% to $28.8 million, or 3.2% of sales, an improvement of
two basis points as a percentage of sales.
In the second quarter, the Company opened three new stores in New York,
NY; Louisville, KY; and Colorado Springs, CO, ending the quarter with 156
stores totaling approximately 4.8 million square feet. Capital expenditures,
excluding acquisitions, in the quarter were $70 million of which $46 million
was for new store development. The Company produced cash flow from operations
of $113 million during the quarter.
Cash and cash equivalents, including restricted cash, totaled
approximately $214 million at the end of the second quarter, and long-term
debt, which includes $155 million in Zero Coupon Convertible Debentures, was
approximately $177 million. On April 19, 2004, subsequent to the end of the
quarter, the Company paid approximately $9 million to shareholders in its
second $0.15 quarterly dividend. Moody's Investors Service recently upgraded
the Company's credit ratings, and the Company's corporate rating is now Baa3,
an investment grade rating.
The Company is pleased to announce the recent signing of seven new store
leases in Los Altos, CA; Miami, FL; Atlanta, GA; Chicago, IL; Portland, OR;
Columbus, OH; and Fairfax, VA. The following table provides additional
information about the Company's store development pipeline.
Stores in development: 5/4/04 5/7/03 % Change
Number 46 27 70%
Average size (gross square feet) 46,400 43,000 8%
As a percentage of existing
store average size 152% 139% ---
Total square footage under
development 2,174,000 1,197,000 82%
As a percentage of existing
square footage 46% 27% ---
Following are certain historical results as a percentage of sales for all
stores for the last four fiscal years, the four-year average through fiscal
year 2003, and year to date for the current fiscal year. This information is
included in order to emphasize the general consistency of the Company's
results as a percentage of sales over this period of time. Total sales
growth, percent of sales from comparable stores, one-year comparable store
sales increases and the sum of two years of comparable store sales increases
(two-year comps) are also included.
4-Year 2004
2000 2001 2002 2003 Average YTD
Gross profit 34.5% 34.8% 34.7% 34.3% 34.5% 34.9%
Direct store expenses 25.0% 25.3% 25.1% 25.2% 25.2% 25.3%
Store contribution 9.4% 9.5% 9.6% 9.2% 9.4% 9.6%
G&A (excl. goodwill
amort.) 3.3% 3.6% 3.6% 3.2% 3.4% 3.2%
Sales growth 23.2% 23.6% 18.4% 17.0% 20.5% 22.5%
% of sales from
comp stores 86.3% 89.0% 90.1% 91.8% 89.7% 93.8%
Comps 8.6% 9.2% 10.0% 8.6% 9.1% 15.8%
Two-year comps 16.3% 17.8% 19.2% 18.6% 18.0% 24.7%
Goals for Fiscal Year 2004
Due to the Company's strong 23% sales growth in the first half of the
year, the Company is raising its expectation for total sales growth for fiscal
year 2004 to the range of 18% to 22%. The Company expects weighted average
year-over-year square footage growth for the year of 10%, including 41,000
square feet related to the expansion of six existing stores. Square footage
growth is expected to be higher in the second half of the fiscal year as the
Company opened four new stores in the first half of the year and expects to
open nine to ten new stores, including a relocation of an existing store, in
the second half of the fiscal year.
The Company does not expect the comparable store sales increases produced
in the first half of the year to continue. The Company expects comparable
store sales growth for the second half of the year to be in the range of 10%
to 12% reflecting a return to more normalized levels as well as the difficult
Easter comparison in the third quarter, an expectation that some Southern
California customers may return to their historical shopping patterns over
time, and increasingly tougher year-over-year comparisons.
The Company expects operating margin improvement in fiscal year 2004
primarily due to an increase in gross profit and a slight improvement in 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.
Capital expenditures are expected to be at the high end of the
$210 million to $240 million range for the year. The Company does not
anticipate 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 $2 million to $3 million.
After producing higher-than-expected sales and earnings in the first
quarter, the Company raised its fiscal year 2004 diluted earnings per share
guidance to $1.93 to $2.02 from $1.88 to $1.96. Based on the higher-than-
expected second quarter sales and earnings, the Company is again raising its
fiscal year 2004 diluted earnings per share guidance to $2.03 to $2.10.
The Company notes that in the third quarter of the prior year, it
recognized a pre-tax gain included in investment and other income of
approximately $3 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.
The Company is not prepared to issue fiscal year 2005 guidance at this
time but emphasizes that comparisons will be especially difficult next year
against the above-average results the Company has produced so far this year,
including 23% sales growth, 15.8% comparable store sales growth and 38%
earnings per share growth. As a result, the Company expects below-average
increases in sales, comparable store sales and earnings in the first half of
fiscal year 2005.
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 April 11, 2004.
http://www.wholefoodsmarket.com/investor/Q204chart.html
About Whole Foods Market:
Founded in 1980 in Austin, Texas, Whole Foods Market(R)
(www.wholefoodsmarket.com ) is the largest natural and organic foods retailer.
The Company had sales of $3.1 billion in fiscal year 2003 and currently has
156 stores in the United States, Canada and the United Kingdom.
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 28, 2003. 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)
Twelve weeks ended Twenty-eight weeks ended
April 11, April 13, April 11, April 13,
2004 2003 2004 2003
Sales $902,141 $725,139 $2,020,289 $1,648,899
Cost of goods sold
and occupancy costs 582,239 475,190 1,315,242 1,084,380
Gross profit 319,902 249,949 705,047 564,519
Direct store expenses 229,469 180,896 511,365 414,440
Store contribution 90,433 69,053 193,682 150,079
General and
administrative
expenses 28,783 23,289 64,652 54,465
Pre-opening and
relocation costs 2,536 1,951 4,332 5,787
Operating income 59,114 43,813 124,698 89,827
Other income (expense):
Interest expense (1,859) (2,021) (4,337) (4,586)
Investment and other
income 1,503 817 2,967 97
Income before income
taxes 58,758 42,609 123,328 85,338
Provision for income
taxes 23,504 17,043 49,332 34,135
Net income $35,254 $25,566 $73,996 $51,203
Basic earnings per
share $0.58 $0.44 $1.22 $0.88
Weighted average
shares outstanding 61,035 58,696 60,620 58,319
Diluted earnings per
share $0.54 $0.41 $1.14 $0.83
Weighted average
shares outstanding,
diluted basis 67,579 65,140 67,039 64,910
Dividends per share $0.15 $--- $0.30 $---
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows (in thousands):
Twelve weeks ended Twenty-eight weeks ended
April 11, April 13, April 11, April 13,
2004 2003 2004 2003
Net income (numerator
for basic earnings
per share) $35,254 $25,566 $73,996 $51,203
Interest on 5% zero
coupon convertible
subordinated
debentures, net of
income taxes 1,084 1,031 2,506 2,387
Adjusted net income
(numerator for
diluted earnings
per share) $36,338 $26,597 $76,502 $53,590
Weighted average
common shares
outstanding
(denominator for
basic earnings per
share) 61,035 58,696 60,620 58,319
Potential common shares
outstanding:
Assumed conversion of
5% zero coupon
convertible
subordinated
debentures 3,281 3,285 3,282 3,285
Assumed exercise of
stock options 3,263 3,159 3,137 3,306
Weighted average common
shares outstanding and
potential additional
common shares
outstanding
(denominator for
diluted earnings per
share) 67,579 65,140 67,039 64,910
Basic earnings
per share $0.58 $0.44 $1.22 $0.88
Diluted earnings
per share $0.54 $0.41 $1.14 $0.83
Whole Foods Market, Inc.
Condensed Consolidated Balance Sheets
April 11, 2004 (unaudited) and September 28, 2003
(In thousands)
Assets
2004 2003
Current assets:
Cash and cash equivalents $196,391 $165,779
Restricted cash 17,904 ---
Trade accounts receivable 61,748 45,947
Merchandise inventories 145,104 123,904
Prepaid expenses and other current assets 33,134 28,054
Total current assets 454,281 363,684
Property and equipment, net of accumulated
depreciation and amortization 810,735 718,240
Long-term investments --- 2,206
Goodwill 112,039 80,548
Intangible assets, net of accumulated
amortization 25,565 26,569
Other assets 18,731 5,573
Total assets $1,421,351 $1,196,820
Liabilities and Shareholders' Equity
2004 2003
Current liabilities:
Current installments of long-term debt and
capital lease obligations $10,262 $5,806
Trade accounts payable 91,757 72,715
Accrued payroll, bonus and other benefits
due team members 90,572 70,875
Dividends payable 9,260 ---
Other accrued expenses 134,020 90,188
Total current liabilities 335,871 239,584
Long-term debt and capital lease obligations,
less current installments 167,149 162,909
Other long-term liabilities 19,086 18,151
Total liabilities 522,106 420,644
Shareholders' equity:
Common stock, no par value, 150,000 shares
authorized, 61,735 and 60,299 shares issued,
61,539 and 60,070 shares outstanding in
2004 and 2003, respectively 490,251 423,297
Accumulated other comprehensive income 2,082 1,624
Retained earnings 406,912 351,255
Total shareholders' equity 899,245 776,176
Commitments and contingencies
Total liabilities and shareholders' equity $1,421,351 $1,196,820
Whole Foods Market, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Twenty-eight weeks ended
April 11, April 13,
2004 2003
Cash flows from operating activities:
Net income $73,996 $51,203
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 57,732 51,315
Loss on disposal of fixed assets 1,482 266
Rent differential 122 (204)
Change in LIFO reserve 1,750 1,420
Interest accretion on long-term debt 4,069 3,938
Tax benefit related to exercise of employee
stock options 18,563 18,238
Impairment loss on long-term investments 479 1,412
Issuance of common stock to 401(k) plan 6 3,119
Cooperative patronage dividends received --- 3,210
Net change in current assets (38,174) (25,661)
Net change in current liabilities 77,330 31,868
Net cash provided by operating activities 197,355 140,124
Cash flows from investing activities:
Development costs of new store locations (80,726) (46,254)
Other property, plant and equipment
expenditures (58,612) (46,528)
Acquisition of intangible assets (49) (6,372)
Payments for purchase of acquired entities,
net of cash acquired (20,392) ---
Increase in restricted cash (17,904)
Increase in notes receivable (13,500) ---
Proceeds from sale of property, plant
and equipment --- 2,664
Proceeds from conversion of long-term
investments --- 1,000
Proceeds from the sale of long-term
investments 1,815 ---
Net cash used in investing activities (189,368) (95,490)
Cash flows from financing activities:
Payments on long-term debt and capital
lease obligations (97) (535)
Issuance of common stock 31,801 37,151
Dividends paid (9,079) ---
Net cash provided by financing activities 22,625 36,616
Cash flows from discontinued operations:
Net cash provided by discontinued operations --- 3,705
Net increase in cash and cash equivalents 30,612 84,955
Cash and cash equivalents at beginning of
period 165,779 12,646
Cash and cash equivalents at end of period $196,391 $97,601
Supplemental disclosures of cash flow information:
Interest paid $1,000 $1,393
Federal and state income taxes paid 19,675 1,198
Non-cash transactions:
Common stock issued in connection with
acquisition $16,375 $---
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides information
regarding EVA in the press release as additional information about its
operating results. This measure is not in accordance with, or an alternative
to, GAAP. The Company's management believes that this presentation provides
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 this measure
for reviewing the financial results of the Company and for incentive
compensation and capital planning purposes. The following table reflects
reconciliations of GAAP information to non-GAAP financial measures:
Twelve weeks ended Twenty-eight weeks ended
April 11, April 13, April 11, April 13,
2004 2003 2004 2003
GAAP Net income $35,254 $25,566 $73,996 $51,203
Provision for income
taxes 23,504 17,043 49,332 34,135
Interest expense and
other 3,252 2,713 6,989 5,708
NOPBT 62,010 45,322 130,317 91,046
Taxes (40%) (24,804) (18,128) (52,127) (36,418)
NOPAT 37,206 27,194 78,190 54,628
Capital charge (29,462) (24,428) (66,813) (55,410)
EVA $7,744 $2,766 $11,377 $(782)
The following tables reflect the pro forma effects of recognizing
compensation cost for stock options, as prescribed by Statement of Financial
Accounting Standards ("SFAS") No. 123 and SFAS No. 148 utilizing the Black
Scholes valuation method, on net income and diluted earnings per share for the
twelve weeks ended:
April 11, % April 13, % %
2004 Sales 2003 Sales Change
Net income $35,254 3.91% $25,566 3.53% 38%
After-tax pro
forma expense (4,323) 0.48% (3,428) 0.47% 26%
Pro forma net
income $30,931 3.43% $22,138 3.05% 40%
Dilution 12% 13%
April 11, April 13, %
2004 2003 Change
Diluted EPS $0.54 $0.41 32%
After-tax pro
forma expense (0.06) (0.05) 20%
Pro forma diluted
EPS $0.48 $0.36 33%
Dilution 11% 12%
Contact: Cindy McCann
VP of Investor Relations
512.477.4455
SOURCE Whole Foods Market, Inc.
-0- 05/04/2004
/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/Q204chart.html /
(WFMI)
CO: Whole Foods Market, Inc.
ST: Texas
IN: FOD REA SUP
SU: ERN ERP CCA MAV