Exhibit 99.1
Whole Foods Market Reports Fourth Quarter Results
Sales Increase 24%, Net Income Increases 27% and Diluted EPS Increase 21%;
Company Announces 27% Increase in Quarterly Dividend
AUSTIN, Texas, Nov. 10 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported sales and earnings for the 12-week quarter and
52-week fiscal year ended September 26, 2004. For the fourth quarter, sales
increased 24% to $927.3 million, net income increased 27% to $30.2 million,
diluted earnings per share increased 21% to $0.46, and Economic Value Added
(EVA) improved $2.0 million to $1.0 million. For the fiscal year, sales
increased 23% to $3.9 billion, net income increased 32% to $137.1 million,
diluted earnings per share increased 26% to $2.09, and EVA improved
$12.6 million to $15.2 million. The Company also announced that its Board of
Directors approved a 27% increase in the quarterly dividend to $0.19 per share
from $0.15 per share.
Operating Highlights 4Q04 FY04
Sales increase 24% 23%
Comparable store sales growth 14.0% 14.9%
Identical store sales growth 13.3% 14.5%
Weighted average square footage growth 13% 9%
Number of stores opened / acquired 3 19
Net income increase 27% 32%
Diluted earnings per share (EPS) increase 21% 26%
EVA increase $2.0 mil $12.6 mil
Cash dividend payments to shareholders $9.4 mil $27.7 mil
"Our fourth quarter results cap off an outstanding year," said John
Mackey, Chairman, Chief Executive Officer, and Co-Founder of Whole Foods
Market. "In a year that has proven to be very challenging for most food
retailers, we grew sales 23% to just under $4 billion, and our 14.9%
comparable store sales increase set a new company record. Our net profit
margin improved 25 basis points to 3.5% of sales, and we produced a 26%
increase in diluted earnings per share to $2.09, which was well ahead of our
initial guidance of $1.87 to $1.95. We reported our fourth consecutive
quarter of positive EVA resulting in record incremental EVA improvement of
$12.6 million. In addition, we are very pleased, after initiating a dividend
payment to shareholders just one year ago, to be announcing a 27% increase in
that dividend today."
# of
Average Average NOPAT Comp
Store Returns for the Quarter Size Comps ROIC Stores
Stores over eight years old 28,000 12.2% 54% 67
Stores between five and
eight years old 34,000 13.9% 38% 27
Stores between two and
five years old 36,000 13.3% 20% 38
Stores less than two years old
(including relocations) 37,000 26.2% 16% 13
Stores in comparable store base 32,000 14.0% 32% 145
Stores open at the end of the
fourth quarter 32,000 27% 163
In the fourth quarter, gross profit increased 35 basis points to 34.7% of
sales, and direct store expenses increased 44 basis points to 25.9% of sales,
resulting in a 10 basis point decrease in store contribution to 8.7% of sales.
For the 145 stores in the comparable store base, gross profit improved 66
basis points to 35.1% of sales, and direct store expenses increased 16 basis
points to 25.6% of sales, resulting in a 49 basis point increase in store
contribution to 9.4% of sales. General and administrative (G&A) expenses were
flat at 3.0% of sales.
As shown in the table below, the Company's fiscal 2004 results were in
line with its historical four-year average results. While there may be more
variability during a particular quarter, the Company points out the
consistency of these line items as a percentage of sales over time.
4-Year
Historical Performance FY00 FY01 FY02 FY03 Average FY04
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% 25.5%
Store contribution 9.4% 9.5% 9.6% 9.2% 9.4% 9.3%
Capital expenditures in the quarter were $64 million of which $37 million
was for new store development. The Company produced cash flow from operations
of $75 million during the quarter and paid approximately $9 million to
shareholders in its third quarterly dividend of $0.15 per share. Cash and
cash equivalents, including restricted cash, were approximately $222 million
at the end of the quarter, and total long-term debt, which includes
$159 million in Zero Coupon Convertible Debentures, was approximately
$171 million.
In the fourth quarter, the Company opened three new stores in Princeton,
NJ; Valencia, CA; and West Vancouver, British Columbia, ending the quarter
with 163 stores totaling approximately 5.1 million square feet. The Company
has opened one store in Hingham, MA and expects to open two additional stores
in Redwood City, CA and Sarasota, FL in the first quarter of fiscal year 2005.
The Company is pleased to announce the recent signing of eight new store
leases in Seattle, WA; Denver, CO; Greenville, SC; Santa Barbara, CA; Long
Island, NY; Manhattan, NY; Sacramento, CA; and Tustin, CA (a relocation). The
following table provides additional information about the Company's store
development pipeline.
Stores in Development 11/10/04 11/12/03 % Change
Number of stores in development 53 35 51%
Average size (gross square feet) 49,000 45,000 9%
As a percentage of existing store
average size 155% 143% -
Total square footage under
development 2,600,000 1,600,000 61%
As a percentage of existing square
footage 50% 35% -
The Company today announced that its Board of Directors approved a 27%
increase in the Company's quarterly dividend to $0.19 per share from $0.15 per
share. The first $0.19 per share quarterly dividend will be payable January
17, 2005 to shareholders of record as of January 7, 2005 and is expected to
pay out approximately $48 million in calendar 2005.
FY00-FY03 FY00-FY04
Historical Performance Average FY04 Average
Sales growth (CAGR) 20.5% 22.8% 21.0%
Comparable store sales growth 9.1% 14.9% 10.3%
Two-year comps (sum of two years) 18.0% 23.5% 19.1%
Future Growth Goals
The Company has a stated long-term growth goal of $10 billion in sales by
the year 2010. As shown in the table above, the Company produced above-
average sales and comparable store sales increases in fiscal year 2004 and
will, therefore, face difficult comparisons in 2005, particularly in the
second quarter when it will be comparing against a 17.1% comparable store
sales increase. For fiscal year 2005, however, the Company still expects
sales growth of 15% to 20% and comparable store sales growth of 8% to 10%.
The Company expects weighted average square footage growth of approximately
15% based on the opening of 15 to 18 new stores, including three relocations.
Diluted earnings per share growth is expected to be lower than sales growth
primarily due to the anticipated acceleration in square footage growth, which
is expected to result in pre-opening expenses in the range of $18 million to
$20 million versus $10 million in the prior year. In addition, new stores
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. Capital expenditures are expected to be in the range of $300 million
to $320 million.
The Company's guidance does not include any impact from the Financial
Accounting Standards Board's (FASB) proposed Statement 123R, Share-based
Payment, which would require all companies to expense share-based payments,
including stock options, at fair value. The current proposed guidelines would
be applied to companies for interim or annual periods beginning after June 15,
2005; therefore, the Company would expect to begin expensing stock options in
the fourth quarter of fiscal year 2005. The Company's guidance excludes any
impact from expensing stock options as FASB has not issued a final statement.
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 26, 2004.
http://www.wholefoodsmarket.com/investor/Q404chart.html
The Company will host a conference call today to discuss this earnings
announcement at 4:00 p.m. CT. 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 1-402-220-1123, and a simultaneous audio webcast will be available
at http://www.wholefoodsmarket.com .
About Whole Foods Market: Founded in 1980 in Austin, Texas, Whole Foods
Market(R) is the largest natural and organic foods retailer. The Company had
sales of $3.9 billion in fiscal year 2004 and currently has 164 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.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Twelve weeks ended Fifty-two weeks ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
2004 2003 2004 2003
Sales $927,306 $750,651 $3,864,950 $3,148,593
Cost of goods sold and
occupancy costs 605,965 493,135 2,521,611 2,067,939
Gross profit 321,341 257,516 1,343,339 1,080,654
Direct store expenses 240,278 191,178 983,765 792,536
Store contribution 81,063 66,338 359,574 288,118
General and administrative
expenses 27,597 22,298 119,800 100,693
Pre-opening and relocation
costs 3,199 3,935 10,459 12,091
Operating income 50,267 40,105 229,315 175,334
Other income (expense):
Interest expense (1,593) (1,621) (7,249) (8,114)
Investment and other income 1,707 1,204 6,456 5,593
Income before income taxes 50,381 39,688 228,522 172,813
Provision for income taxes 20,153 15,876 91,409 69,126
Net income $ 30,228 $ 23,812 $137,113 $103,687
Basic earnings per share $ 0.48 $ 0.40 $ 2.24 $ 1.76
Weighted average shares
outstanding 62,339 59,989 61,324 59,035
Diluted earnings per share $ 0.46 $ 0.38 $ 2.09 $ 1.66
Weighted average shares
outstanding, diluted basis 68,613 65,827 67,727 65,330
Dividends per share $ 0.15 $ --- $ 0.60 $ ---
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. 26, Sept. 28, Sept. 26, Sept. 28,
2004 2003 2004 2003
Net income (numerator for
basic earnings per share) $ 30,228 $ 23,812 $137,113 $103,687
Interest on 5% zero coupon
convertible subordinated
debentures, net
of income taxes 1,099 1,052 4,697 4,481
Adjusted net income
(numerator for diluted
earnings per share) $ 31,327 $ 24,864 $141,810 $108,168
Weighted average common
shares outstanding
(denominator for basic
earnings per share) 62,339 59,989 61,324 59,035
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 2,994 2,553 3,122 3,010
Weighted average common
shares outstanding and
potential additional common
shares outstanding
(denominator for diluted
earnings per share) 68,613 65,827 67,727 65,330
Basic earnings per share $ 0.48 $ 0.40 $ 2.24 $ 1.76
Diluted earnings per share $ 0.46 $ 0.38 $ 2.09 $ 1.66
Whole Foods Market, Inc.
Consolidated Balance Sheets
September 26, 2004 and September 28, 2003
(In thousands)
Assets
2004 2003
Current assets:
Cash and cash equivalents $ 198,377 $165,779
Restricted cash 23,160 ---
Trade accounts receivable 64,972 45,947
Merchandise inventories 152,912 123,904
Prepaid expenses and other current assets 16,702 12,447
Deferred income taxes 28,894 15,607
Total current assets 485,017 363,684
Property and equipment, net of accumulated
depreciation and amortization 877,457 718,240
Long-term investments --- 2,206
Goodwill 112,186 80,548
Intangible assets, net of
accumulated amortization 24,831 26,569
Other assets 20,302 5,573
Total assets $1,519,793 $1,196,820
Liabilities And Shareholders' Equity
2004 2003
Current liabilities:
Current installments of long-term debt
and capital lease obligations $ 5,719 $ 5,806
Trade accounts payable 90,751 72,715
Accrued payroll, bonus and other benefits
due team members 100,536 70,875
Dividends payable 9,361 ---
Other accrued expenses 124,641 90,188
Total current liabilities 331,008 239,584
Long-term debt and capital lease
obligations, less current installments 165,024 162,909
Deferred rent liability 13,566 13,349
Other long-term liabilities 1,581 2,301
Deferred income taxes 20,175 2,501
Total liabilities 531,354 420,644
Shareholders' equity:
Common stock, no par value, 150,000 shares
authorized; 62,771 and 60,299 shares
issued; 62,408 and 60,070 shares
outstanding in 2004 and 2003 respectively 535,107 423,297
Accumulated other comprehensive income 2,053 1,624
Retained earnings 451,279 351,255
Total shareholders' equity 988,439 776,176
Commitments and contingencies
Total liabilities and
shareholders' equity $1,519,793 $1,196,820
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Fifty-two weeks ended
September 26, September 28,
2004 2003
Cash flows from operating activities
Net Income $137,113 $103,687
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 111,891 97,986
Loss on disposition of assets 5,769 771
Deferred income tax expense (benefit) 4,387 5,712
Tax benefit related to exercise of
employee stock options 35,583 25,917
Interest accretion on long-term debt 7,551 7,339
Other (942) 10,102
Net change in current assets
and liabilities
Trade accounts receivable (19,158) (15,209)
Merchandise inventories (27,868) (17,714)
Prepaid expense and other
current assets (2,940) (1,755)
Trade accounts payable 12,515 13,005
Accrued payroll, bonus and other
benefits due team members 29,646 11,516
Other accrued expenses 35,279 38,100
Net cash provided by operating activities 328,826 279,457
Cash flows from investing activities
Development costs of new store locations (155,214) (89,007)
Other property, plant and
equipment expenditures (109,739) (84,103)
Acquisition of intangible assets (584) (6,456)
Increase in notes receivable (13,500) ---
Increase in restricted cash (23,160) ---
Payment for purchase of acquired
entities, net of cash acquired (18,873) ---
Other investing activities 1,916 3,763
Net cash used in investing activities (319,154) (175,803)
Cash flows from financing activities
Dividends paid (27,728) ---
Issuance of common stock 59,518 52,270
Payments on long-term debt and capital
lease obligations (8,864) (5,835)
Net cash provided by financing activities 22,926 46,435
Cash flows from discontinued operations
Net cash provided by discontinued operations --- 3,044
Net increase in cash and cash
equivalents 32,598 153,133
Cash and cash equivalents at
beginning of period 165,779 12,646
Cash and cash equivalents at
end of period $198,377 $165,779
Supplemental disclosure of
cash flow information:
Interest paid $ 2,127 $ 2,084
Federal and state income taxes paid $ 60,372 $ 16,375
Non-cash transactions:
Common stock issued in connection
with acquisition $ 16,375 $ ---
Whole Foods Market, Inc.
Other Financial Information
(In thousands, except per share amounts)
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides information
regarding Economic Value Added ("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 its 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 a reconciliation
of this non-GAAP financial measure to GAAP net income, which the Company
believes to be the most directly comparable GAAP financial measure.
EVA
Twelve weeks ended Fifty-two weeks ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
2004 2003 2004 2003
GAAP Net income $ 30,228 $ 23,812 $ 137,113 $ 103,687
Provision for income taxes 20,153 15,876 91,409 69,126
Interest expense and other 3,168 3,348 11,955 11,823
NOPBT 53,549 43,036 240,477 184,636
Taxes (40%) (21,420) (17,214) (96,191) (73,854)
NOPAT 32,129 25,822 144,286 110,782
Capital Charge (9%) (31,175) (26,894) (129,104) (108,231)
EVA $ 954 $ (1,072) $ 15,182 $ 2,551
The following tables reflect the pro forma effects of recognizing
compensation cost for stock options in accordance with Statement of
Financial Accounting Standards No. 123:
Stock-Based Compensation
Twelve weeks ended Fifty-two weeks ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
Net income 2004 2003 2004 2003
Net income $ 30,228 $ 23,812 $137,113 $103,687
After-tax pro forma expense (7,195) (4,689) (23,888) (17,675)
Pro forma net income $ 23,033 $ 19,123 $113,225 $ 86,012
Dilution 24% 20% 17% 17%
Earnings per share
Net income $ 0.46 $ 0.38 $ 2.09 $ 1.66
After-tax pro forma expense (0.10) (0.07) (0.33) (0.25)
Pro forma net income $ 0.36 $ 0.31 $ 1.76 $ 1.41
Dilution 22% 18% 16% 15%
CONTACT: Cindy McCann, VP of Investor Relations of Whole Foods Market,
Inc., +1-512-477-4455
SOURCE Whole Foods Market, Inc.
-0- 11/10/2004
/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 DIV CCA MAV