Exhibit 99.1
14.1% Comparable Store Sales Growth Drives 22% Sales Increase;
Company Initiates Fiscal Year 2005 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 1-800-540-0559 and the
conference ID is "Whole Foods." A replay will be available for approximately
48 hours at 1-402-530-9027. A simultaneous audio webcast will also be
available at http://www.wholefoodsmarket.com . The audio webcast will be
archived for thirty days.
AUSTIN, Texas, July 28 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported sales and earnings for the third quarter ended
July 4, 2004. Sales for the 12-week quarter increased 22% to $917 million
from $749 million in the prior year. This increase was driven by 9% weighted
average year-over-year square footage growth and comparable store sales growth
of 14.1%. Sales in identical stores (excluding two relocated stores and two
major store expansions) increased 13.7% for the quarter.
Net income for the quarter increased 15% to $32.9 million from
$28.7 million in the prior year, and diluted earnings per share increased 10%
to $0.50 from $0.45 in the prior year. Excluding the pre-tax gain of
approximately $3 million, or approximately $0.03 in diluted earnings per
share, related to the distribution of proceeds from the sale of Blooming
Prairie Cooperative in the prior year, net income for the quarter increased
22% and diluted earnings per share increased 17%.
Net operating profit after taxes (NOPAT) increased 12% to $34.0 million
for the quarter. The Company's capital charge for the quarter was
$31.1 million, resulting in Economic Value Added (EVA) of $2.9 million.
Store Returns for the Quarter:
# of
Average Average NOPAT Comp
Size Comps ROIC Stores
Stores over eight years old 28,100 12.0% 59% 64
Stores between five and eight years old 31,700 11.7% 43% 26
Stores between two and five years old 36,500 14.6% 23% 36
Stores less than two years old
(including relocations) 36,000 25.9% 13% 17
All stores in comparable store base 31,800 14.1% 34% 143
All stores open at the end of the
third quarter 31,300 29% 160
"We are experiencing one of the best years in our company's history with
sales increasing 23% to $2.9 billion, net income increasing 34% to
$107 million, which is more than we earned in all of last fiscal year, and EVA
improving over $10 million," said John Mackey, Whole Foods Market CEO,
President, Chairman and Co-founder. "Our comparable stores are producing
record sales increases of 15.2% year to date, and our new stores continue to
open above our expectations producing $595,000 in average weekly sales. We
believe our strong results are due in part to the growing equity of the Whole
Foods Market brand and demonstrate the tremendous growth opportunities that
lie ahead for our company."
In the third quarter, gross profit increased two basis points to 34.6% of
sales, and direct store expenses increased 35 basis points to 25.3% of sales,
resulting in a 33 basis point decrease in store contribution to 9.3% of sales.
For the 143 stores in the comparable store base, gross profit improved
41 basis points to 34.9% of sales, and direct store expenses increased
10 basis points to 25.0% of sales, resulting in a 32 basis point increase in
store contribution to 9.8% of sales. General and administrative (G&A)
expenses decreased 19 basis points to 3.0% of sales.
In the third quarter, the Company opened five new stores in Charleston,
SC; White Plains, NY; Fort Collins, CO; Bellevue, WA and Glendale, CA (a
relocation), ending the quarter with 160 stores totaling approximately five
million square feet. Capital expenditures in the quarter were $62 million of
which $37 million was for new store development. The Company produced cash
flow from operations of $57 million during the quarter.
Cash and cash equivalents, including restricted cash, totaled
approximately $213 million at the end of the third quarter, and long-term
debt, which includes $157 million in Zero Coupon Convertible Debentures, was
approximately $168 million. On July 19, 2004, the Company paid approximately
$9 million to shareholders in its third quarterly dividend of $0.15 per share.
Stores in Development
The Company is pleased to announce the recent signing of eight new store
leases in Redmond, WA; New York, NY; Henderson, NV; Charlotte, NC; Cranston,
RI; Woburn, MA; Manhattan Beach, CA; and Austin, TX (a relocation). The
following table provides additional information about the Company's store
development pipeline.
7/28/04 7/30/03 % Change
Number 49 29 69%
Average size (gross square feet) 47,800 44,800 7%
As a percentage of existing store
average size 153% 145% ---
Total square footage under development 2,351,000 1,335,000 76%
As a percentage of existing
square footage 47% 30% ---
Historical Performance
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% 34.8%
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% 9.5%
G&A (excl. goodwill amort.) 3.3% 3.6% 3.6% 3.2% 3.4% 3.1%
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% 91.3%
Comps 8.6% 9.2% 10.0% 8.6% 9.1% 15.2%
Two-year comps 16.3% 17.8% 19.2% 18.6% 18.0% 23.7%
Goals for Fiscal Year 2004
The Company expects comparable store sales growth for the fourth quarter
to be in the range of 11% to 13%. This guidance range reflects the above
average comparable store sales growth the Company has been experiencing this
year while taking into account the tougher year-over-year comparison in the
fourth quarter. The Company expects to open four new stores in the fourth
quarter. Based on the Company's strong year-to-date results, sales growth for
the fiscal year is expected to be at the high end of the Company's previously
stated 18% to 22% range of guidance. The Company expects operating margin
improvement in fiscal year 2004 primarily due to an increase in gross margin,
along with slight improvements in G&A and pre-opening and relocation expenses
as a percentage of sales. The Company expects diluted earnings per share for
the fiscal year to be at the higher end of its previously stated $2.03 to
$2.10 range of guidance.
Goals for Fiscal Year 2005
For fiscal year 2005, the Company expects total sales and earnings growth
in line with its stated long-term goal of 15% to 20%. The Company expects
weighted average square footage growth of approximately 15%. The Company
faces difficult comparisons with regard to sales growth, comparable store
sales increases, and diluted earnings per share growth due to the Company's
above-average results so far in fiscal year 2004. Additionally, diluted
earnings per share growth could be lower than sales growth due to an expected
acceleration in square footage growth which would result in higher pre-opening
expense and could have some negative impact on store contribution, as new
stores generally have lower gross margins and higher direct store expenses
than more mature stores.
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 July 4, 2004.
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
retailer. The Company had sales of $3.1 billion in fiscal year 2003 and
currently has 160 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.
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 4, July 6, July 4, July 6,
2004 2003 2004 2003
Sales $917,355 $ 749,043 $2,937,644 $2,397,942
Cost of goods sold and
occupancy costs 600,404 490,424 1,915,646 1,574,804
Gross profit 316,951 258,619 1,021,998 823,138
Direct store expenses 232,122 186,918 743,487 601,358
Store contribution 84,829 71,701 278,511 221,780
General and administrative
expenses 27,551 23,930 92,203 78,395
Pre-opening and relocation
costs 2,928 2,369 7,260 8,156
Operating income 54,350 45,402 179,048 135,229
Other income (expense):
Interest expense (1,319) (1,907) (5,656) (6,493)
Investment and other income 1,782 4,292 4,749 4,389
Income before income taxes 54,813 47,787 178,141 133,125
Provision for income taxes 21,924 19,115 71,256 53,250
Net income $ 32,889 $ 28,672 $ 106,885 $ 79,875
Basic earnings per share $ 0.53 $ 0.48 $ 1.75 $ 1.36
Weighted average shares
outstanding 61,951 59,752 61,019 58,749
Diluted earnings per share $ 0.50 $ 0.45 $ 1.64 $ 1.28
Weighted average shares
outstanding, diluted basis 68,446 65,811 67,461 65,180
Dividends per share $ 0.15 $ --- $ 0.45 $ ---
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 4, July 6, July 4, July 6,
2004 2003 2004 2003
Net income (numerator for
basic earnings per share) $ 32,889 $ 28,672 $106,885 $ 79,875
Interest on 5% zero coupon
convertible subordinated
debentures, net of income
taxes 1,092 1,042 3,598 3,429
Adjusted net income
(numerator for diluted
earnings per share) $ 33,981 $ 29,714 $110,483 $ 83,304
Weighted average common
shares outstanding
(denominator for basic
earnings per share) 61,951 59,752 61,019 58,749
Potential common shares
outstanding:
Assumed conversion of 5%
zero coupon convertible
subordinated debentures 3,280 3,285 3,281 3,285
Assumed exercise of stock
options 3,215 2,774 3,161 3,146
Weighted average common
shares outstanding and
potential additional common
shares outstanding
(denominator for diluted
earnings per share) 68,446 65,811 67,461 65,180
Basic earnings per share $ 0.53 $ 0.48 $ 1.75 $ 1.36
Diluted earnings per share $ 0.50 $ 0.45 $ 1.64 $ 1.28
Whole Foods Market, Inc.
Condensed Consolidated Balance Sheets
July 4, 2004 (unaudited) and September 28, 2003
(In thousands)
Assets
2004 2003
Current assets:
Cash and cash equivalents $ 195,324 $ 165,779
Restricted cash 17,939 ---
Trade accounts receivable 55,349 45,947
Merchandise inventories 153,793 123,904
Prepaid expenses and other current assets 32,498 28,054
Total current assets 454,903 363,684
Property and equipment, net of accumulated
depreciation and amortization 846,923 718,240
Long-term investments --- 2,206
Goodwill 112,072 80,548
Intangible assets, net of accumulated
amortization 25,423 26,569
Other assets 19,495 5,573
Total assets $1,458,816 $1,196,820
Liabilities and Shareholders' Equity
2004 2003
Current liabilities:
Current installments of long-term debt
and capital lease obligations $ 5,990 $ 5,806
Trade accounts payable 95,953 72,715
Accrued payroll, bonus and employee benefits 97,283 70,875
Dividends payable 9,345 ---
Other accrued expenses 108,672 90,188
Total current liabilities 317,243 239,584
Long-term debt and capital lease
obligations, less current installments 163,088 162,909
Other long-term liabilities 18,871 18,151
Total liabilities 499,202 420,644
Shareholders' equity:
Common stock, no par value, 150,000 shares
authorized, 62,762 and 60,299 shares issued,
62,263 and 60,070 shares outstanding in 2004
and 2003, respectively 527,825 423,297
Accumulated other comprehensive income 1,307 1,624
Retained earnings 430,482 351,255
Total shareholders' equity 959,614 776,176
Commitments and contingencies
Total liabilities and shareholders' equity $1,458,816 $1,196,820
Whole Foods Market, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Forty weeks ended
July 4, July 6,
2004 2003
Cash flows from operating activities:
Net income $106,885 $ 79,875
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 83,856 74,318
Loss on disposal of fixed assets 1,444 452
Rent differential 407 785
Change in LIFO reserve 2,500 1,840
Interest accretion on long-term debt 5,775 5,632
Tax benefit related to exercise of employee
stock options 32,527 24,015
Impairment loss on long-term investments 479 1,412
Issuance of common stock to 401(k) plan 6 3,122
Cooperative patronage dividends received --- 3,210
Net change in current assets (41,329) (38,496)
Net change in current liabilities 61,907 48,437
Net cash provided by operating activities 254,457 204,602
Cash flows from investing activities:
Development costs of new store locations (117,718) (64,535)
Other property, plant and equipment
expenditures (83,385) (64,346)
Acquisition of intangible assets (584) (6,552)
Payments for purchase of acquired entities,
net of cash acquired (20,542) ---
Increase in restricted cash (17,939) ---
Increase in notes receivable (13,500) ---
Proceeds from sale of property, plant
and equipment --- 2,709
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 (251,853) (131,724)
Cash flows from financing activities:
Payments on long-term debt and capital
lease obligations (10,086) (6,341)
Issuance of common stock 55,340 48,295
Dividends paid (18,313) ---
Net cash provided by financing activities 26,941 41,954
Cash flows from discontinued operations:
Net cash provided by discontinued operations --- 3,557
Net increase in cash and cash equivalents 29,545 118,389
Cash and cash equivalents at beginning of period 165,779 12,646
Cash and cash equivalents at end of period $195,324 $131,035
Supplemental disclosures of cash flow information:
Interest paid $ 1,472 $ 1,939
Federal and state income taxes paid $ 48,569 $ 8,136
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 about 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 incentive compensation
and capital planning purposes. The following tables reflect reconciliations
of GAAP information to non-GAAP financial measures:
Twelve weeks ended Forty weeks ended
July 4, July 6, July 4, July 6,
2004 2003 2004 2003
GAAP Net income $32,889 $28,672 $106,885 $79,875
Blooming Prairie gain --- (3,020) --- (3,020)
Income taxes (40%) --- 1,208 --- 1,208
Adjusted net income 32,889 26,860 106,885 78,063
Interest on convertible
debenture, net 1,092 1,042 3,598 3,429
Adjusted net income,
diluted $33,981 $27,902 $110,483 $81,492
Adjusted diluted earnings
per share $ 0.50 $ 0.42 $ 1.64 $ 1.25
Weighted average shares
outstanding, diluted 68,446 65,811 67,461 65,180
Twelve weeks ended Forty weeks ended
July 4, July 6, July 4, July 6,
2004 2003 2004 2003
GAAP Net income $ 32,889 $ 28,672 $106,885 $ 79,875
Provision for income taxes 21,924 19,115 71,256 53,250
Interest expense and other 1,798 2,767 8,787 8,475
NOPBT 56,611 50,554 186,928 141,600
Taxes (40%) (22,644) (20,222) (74,771) (56,640)
NOPAT 33,967 30,332 112,157 84,960
Capital charge (31,116) (25,927) (97,929) (81,337)
EVA $ 2,851 $ 4,405 $ 14,228 $ 3,623
The following tables reflect the pro forma effects of recognizing
compensation cost for stock options for the twelve weeks ended:
Net income
July 4, % July 6, % %
2004 Sales 2003 Sales Change
Net income $ 32,889 3.6% $ 28,672 3.8% 14.7%
After-tax pro forma expense (6,135) 0.7% (4,852) 0.6% 26.4%
Pro forma net income $ 26,754 2.9% $ 23,820 3.2% 12.3%
Dilution 18.7% 16.9%
Earnings per share
July 4, July 6, %
2004 2003 Change
Diluted EPS $ 0.50 $ 0.45 10.0%
After-tax pro forma expense (0.08) (0.07) 23.3%
Pro forma diluted EPS $ 0.41 $ 0.38 7.6%
Dilution 16.6% 14.8%
SOURCE Whole Foods Market, Inc.
-0- 07/28/2004
/CONTACT: Cindy McCann, VP of Investor Relations of Whole Foods Market,
Inc., +1-512-477-4455/
/Web site: http://www.wholefoodsmarket.com /
(WFMI)
CO: Whole Foods Market, Inc.
ST: Texas
IN: FOD REA SUP
SU: ERN ERP CCA MAV