Exhibit 99.1
For Immediate Release
Contact: Cindy McCann
VP of Investor Relations
512.542.0204
WHOLE FOODS MARKET REPORTS THIRD QUARTER RESULTS
DILUTED EPS INCREASE 27% TO $0.37 ON 18% SALES INCREASE;
COMPARABLE STORES SALES INCREASE 9.9% ON TOP OF 15.2% INCREASE IN PRIOR YEAR;
COMPANY EXPECTS FISCAL YEAR 2007 GROWTH IN OPERATING INCOME BEFORE
PRE-OPENING IN LINE WITH SALES GROWTH
AUSTIN, Texas, July 31 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(NASDAQ: WFMI) today reported sales and earnings for the 12-week quarter ended
July 2, 2006. For the quarter, sales increased 18% to $1.3 billion driven by 14%
weighted average square footage growth and 9.9% comparable store sales growth.
Sales in identical stores (excluding two relocated stores and one major
expansion) increased 9.6%. Net income increased 33% to $53.9 million, diluted
earnings per share increased 27% to $0.37, operating cash flow per share was
$0.86, and Economic Value Added (EVA) improved $11.0 million to $20.6 million.
These results include approximately $1.4 million in non-cash share-based
compensation expense and approximately $3.7 million in pre-tax credits for
insurance proceeds and other adjustments related to Hurricane Katrina.
For the 40-week period ended July 2, 2006, sales increased 20% to $4.3 billion
driven by 14% weighted average square footage growth and comparable store sales
growth of 11.7%. Sales in identical stores (excluding four relocated stores and
one major expansion) increased 10.9%. Net income increased 29% to $164.0
million, diluted earnings per share increased 21% to $1.13, operating cash flow
per share was $2.35, and Economic Value Added (EVA) improved $28.5 million to
$56.1 million. These results include approximately $4.5 million in non-cash
share-based compensation expense and approximately $7.2 million in pre-tax
credits for insurance proceeds and other adjustments related to Hurricane
Katrina.
The following table shows the Company's growth in sales, comparable store sales,
and square footage year to date compared to its historical five-year ranges and
average results, highlighting the Company's strong historical and year-to-date
performance.
FIVE-YEAR FY RANGE FIVE-YEAR FY06
------------------------ ---------- ----------
LOW HIGH FY AVERAGE YTD
---------- ---------- ---------- ----------
Sales growth 17.0% 22.8% 20.7% 20.4%
Comparable store sales growth 8.6% 14.9% 11.1% 11.7%
Two-year comps (sum of two years) 17.8% 27.8% 21.4% 24.3%
Weighted average square footage growth 9% 17% 14% 14%
"We are very pleased to report 9.9% comparable store sales growth for the
quarter given our tough 15.2% comparison in the prior year. This translates to a
25.1% two-year comp in the third quarter, the highest we have produced this
year," said John Mackey, chairman, chief executive officer, and co-founder of
Whole Foods Market. "We continue to expect comparable store sales growth for the
full year of 10% to 12% which will mark our third year of double-digit comp
sales growth."
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
The following table breaks out additional information on the quarter for
comparable stores and all stores, highlighting the Company's strong performance
throughout its store base.
AVERAGE AVERAGE NOPAT # OF
COMPARABLE STORES SIZE COMPS ROIC* STORES
- ------------------------------------------------------- ---------- ---------- ---------- ----------
Over 11 years old 28,700 7.4% 87% 45
Between eight and 11 years old 29,600 7.8% 80% 35
Between five and eight years old 32,400 8.9% 49% 39
Between two and five years old 36,900 12.8% 30% 37
Less than two years old (includes four relocations) 45,000 18.6% 9% 14
---------- ---------- ---------- ----------
All comparable stores (7.7 years old, average
age s.f. adjusted) 32,900 9.9% 46% 170
All stores (6.9 years old, average age s.f. adjusted) 34,000 39% 183
* Includes pre-opening expense
Gross profit consists of sales less cost of goods sold and occupancy costs plus
the contribution from non-retail distribution and food preparation operations.
Gross profit improved four basis points to 35.3% of sales. These results include
a $0.9 million credit for inventory adjustments related to Hurricane Katrina and
a LIFO charge of $0.8 million versus no charge in the third quarter last year.
For stores in the comparable store base, gross profit improved 26 basis points
to 35.4% of sales.
Direct store expenses improved 15 basis points to 25.1% of sales. Direct store
expenses include a $1.2 million credit for asset adjustments related to
Hurricane Katrina. For stores in the comparable store base, direct store
expenses improved 54 basis points to 24.6% of sales.
G&A expenses improved 21 basis points to 3.3% of sales.
The following table shows the Company's year-to-date results for certain line
items as a percentage of sales compared to its historical five-year ranges and
average results, highlighting that these results have been very consistent on an
annualized basis over time.
FIVE-YEAR FY RANGE FIVE-YEAR FY06
------------------------ ---------- ----------
HISTORICAL AND CURRENT PERFORMANCE LOW HIGH FY AVERAGE YTD
- ------------------------------------------------------- ---------- ---------- ---------- ----------
Gross profit 34.2% 35.1% 34.7% 35.0%
Direct store expenses 25.2% 26.0% 25.5% 25.3%
G&A 3.1% 3.6% 3.3% 3.2%
Pre-opening and relocation costs were $7.9 million of which approximately $5.1
million was pre-opening rent and approximately $1.6 million was accelerated
depreciation related to relocations.
Net interest and other income increased $2.9 million to $5.6 million. Interest
and other income includes $1.6 million of business-interruption insurance
proceeds related to Hurricane Katrina.
Including $1.4 million in pre-tax share-based compensation expense, net income
increased 33% to $53.9 million or 4.0% of sales, and fully diluted earnings per
share increased 27% to $0.37.
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
-2-
During the quarter, the Company produced $125 million in cash flow from
operations, received $41 million in proceeds from the exercise of stock options
and paid approximately $21 million to shareholders in cash dividends. Year to
date, the Company has produced $342 million in cash flow from operations,
received $209 million in proceeds from the exercise of stock options and paid
approximately $337 million to shareholders in cash dividends.
Capital expenditures in the quarter were $74 million of which $45 million was
for new stores and $29 million was for remodels and other. Capital expenditures
year to date have totaled $198 million of which $111 million was for new stores
and $86 million was for remodels and other. During the quarter, the Company
retired its senior notes making the final $5.7 million principal payment in May.
The Company's total cash and investments were approximately $397 million at the
end of the quarter, and total long-term debt consisting primarily of zero coupon
convertible debentures was approximately $9 million.
At July 2, 2006, the Company had investments in short-term variable rate demand
obligations (VRDOs) totaling approximately $274 million included in "short-term
investments - available-for-sale securities" on the accompanying balance sheet.
These investments are generally tax-free municipal obligations with contractual
maturities of less than 90 days. Historically, most companies have classified
investments in VRDOs as cash equivalents due to their liquidity. Based on
information about a recent clarification of the preferred balance sheet
classification of VRDOs, the Company has elected to classify its VRDO
investments in "short-term investments".
NEW STORE DEVELOPMENT
In the third quarter, the Company opened one new store in Greenville, SC and
closed a 2,600 square foot Fresh & Wild store in the U.K. In the fourth quarter,
the Company plans to open four stores averaging 58,000 square feet in size, one
of which is a relocation. Three of these stores are expected to open at the end
of the quarter.
The Company continues to add to its store development pipeline with the recent
signing of eight new store leases averaging 55,000 square feet in size which are
as follows: Dublin, CA; Oxnard, CA; Los Angeles, CA; Denver, CO; Connecticut;
Florida; Schaumburg, IL; and New Jersey. In addition, the Company has signed a
lease to expand its store in Boulder, CO from 39,000 square feet to 74,000
square feet.
The following table provides additional information about the Company's new
store openings over the last four quarters, leases currently tendered, and store
development pipeline for stores scheduled to open through fiscal year 2009.
STORES OPENED LEASES LEASES
NEW STORE INFORMATION LAST FOUR QTRS TENDERED SIGNED*
- ------------------------------------------------------- -------------- -------------- --------------
Number of stores (including relocations) 14 14 86
Number of relocations 1 2 16
New markets 6 2 17
Average store size (gross square feet) 50,400 53,900 55,400
As a percentage of existing store average size 148% 159% 163%
Total square footage 705,000 755,000 4,847,000
As a percentage of existing square footage 11% 12% 78%
Average pre-opening expense per store $2.1 million - -
Average tender period* 9.6 months - -
*Includes leases tendered
GROWTH GOALS FOR FISCAL YEAR 2006
For fiscal year 2006, the Company expects sales growth in the range of 18% to
21%, comparable store sales growth of 10% to 12%, and weighted average square
footage growth in line with its 14% historical average.
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
-3-
The Company expects non-cash share-based compensation expense of approximately
$2 million to $3 million and pre-opening and relocation costs of approximately
$13 to $15 million in the fourth quarter.
Capital expenditures for the year are now expected to be in the range of $310
million to $330 million.
Based on the Company's better-than-expected year-to-date diluted earnings per
share of $1.13, the Company now expects diluted earnings per share growth in
fiscal year 2006 to be in line with or slightly higher than sales growth. As
previously stated, this guidance excludes the $16.5 million in costs relating to
Hurricane Katrina in fiscal year 2005, share-based compensation expense in
fiscal years 2005 and 2006, and uses a 40% tax rate in both years.
GROWTH GOALS FOR FISCAL YEAR 2007 AND BEYOND
The Company notes that fiscal year 2007 will be a 53-week year, with the
fifty-third week occurring in the fourth quarter. For fiscal year 2007, on a
52-week to 52-week basis, the Company expects total sales growth of 15% to 20%.
The Company expects growth in operating income before pre-opening and relocation
costs to be in line with sales growth.
Ten of the Company's 14 tendered stores, representing approximately 520,000
square feet, are expected to open in fiscal year 2007. This 520,000 square feet
is equal to roughly 78% of the square footage expected to open in all of fiscal
year 2006, and the Company expects to announce additional stores tendered for
openings in 2007 over the next two quarters.
The anticipated acceleration in leases tendered and square footage opening in
2007 is expected to result in materially higher pre-opening and relocation
expense year over year which, in turn, is expected to impact the Company's
diluted earnings per share growth.
Longer term, the Company's goal is to reach $12 billion in sales in 2010.
ABOUT WHOLE FOODS MARKET:
Founded in 1980 in Austin, Texas, Whole Foods Market(R) is a Fortune 500 company
and the largest natural and organic foods retailer. The Company had sales of
$4.7 billion in fiscal year 2005 and currently has 183 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 impact of
competition, and other risks detailed from time to time in the Company's SEC
reports, including the reports on Form 10-K and 10-K/A Amendment No. 1 for the
fiscal year ended September 25, 2005. The Company does not undertake any
obligation to update forward-looking statements.
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 simultaneous audio webcast will be available
at http://www.wholefoodsmarket.com.
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
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Whole Foods Market, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Twelve weeks ended Forty weeks ended
--------------------------- ---------------------------
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Sales $ 1,337,886 $ 1,132,736 $ 4,316,359 $ 3,586,222
Cost of goods sold and occupancy costs 866,260 733,931 2,806,298 2,327,103
Gross profit 471,626 398,805 1,510,061 1,259,119
Direct store expenses 335,555 285,804 1,090,463 910,497
Store contribution 136,071 113,001 419,598 348,622
General and administrative expenses 43,955 39,618 138,265 114,792
Operating income before pre-opening and relocation costs 92,116 73,383 281,333 233,830
Pre-opening and relocation costs 7,860 8,777 23,675 25,641
Operating income 84,256 64,606 257,658 208,189
Other income (expense):
Interest expense (8) (163) (11) (2,213)
Investment and other income 5,581 2,868 15,731 6,175
Income before income taxes 89,829 67,311 273,378 212,151
Provision for income taxes 35,931 26,924 109,351 84,860
Net income $ 53,898 $ 40,387 $ 164,027 $ 127,291
Basic earnings per share $ 0.38 $ 0.31 $ 1.18 $ 0.99
Weighted average shares outstanding 140,712 131,797 139,062 128,625
Diluted earnings per share $ 0.37 $ 0.29 $ 1.13 $ 0.93
Weighted average shares outstanding, diluted basis 145,925 140,745 145,567 139,160
Dividends per share $ 0.15 $ 0.13 $ 2.45 $ 0.35
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 2, July 3, July 2, July 3,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Net income (numerator for basic earnings per share) $ 53,898 $ 40,387 $ 164,027 $ 127,291
Interest on 5% zero coupon convertible subordinated
debentures, net of income taxes 61 483 225 2,441
Adjusted net income (numerator for diluted earnings
per share) $ 53,959 $ 40,870 $ 164,252 $ 129,732
Weighted average common shares outstanding (denominator
for basic earnings per share) 140,712 131,797 139,062 128,625
Potential common shares outstanding:
Assumed conversion of 5% zero coupon convertible
subordinated debentures 335 2,752 378 4,284
Assumed exercise of stock options 4,878 6,196 6,127 6,251
Weighted average common shares outstanding and
potential additional common shares outstanding
(denominator for diluted earnings per share) 145,925 140,745 145,567 139,160
Basic earnings per share $ 0.38 $ 0.31 $ 1.18 $ 0.99
Diluted earnings per share $ 0.37 $ 0.29 $ 1.13 $ 0.93
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
-5-
Whole Foods Market, Inc.
Consolidated Balance Sheets
July 2, 2006 and September 25, 2005
(In thousands)
Assets 2006 2005
- ------------------------------------------------------ ---------- ----------
Current assets:
Cash and cash equivalents $ 47,745 $ 308,524
Short-term investments - available-
for-sale securities 274,728 -
Restricted cash 59,371 36,922
Trade accounts receivable 68,770 66,682
Merchandise inventories 209,151 174,848
Deferred income taxes 51,899 39,588
Prepaid expenses and other current assets 31,282 45,965
Total current assets 742,946 672,529
Property and equipment, net of accumulated
depreciation and amortization 1,137,768 1,054,605
Long-term investments - available-
for-sale securities 15,121 -
Goodwill 113,494 112,476
Intangible assets, net of accumulated
amortization 35,308 21,990
Deferred income taxes 29,214 22,452
Other assets 4,954 5,244
Total assets $2,078,805 $1,889,296
Liabilities And Shareholders' Equity 2006 2005
- ------------------------------------------------------ ---------- ----------
Current liabilities:
Current installments of long-term
debt and capital lease obligations $ 97 $ 5,932
Trade accounts payable 120,710 103,348
Accrued payroll, bonus and other
benefits due team members 150,618 126,981
Dividends payable 21,177 17,208
Other current liabilities 228,261 164,914
Total current liabilities 520,863 418,383
Long-term debt and capital lease
obligations, less current installments 8,538 12,932
Deferred rent liability 107,480 91,775
Other long-term liabilities 84 530
Total liabilities 636,965 523,620
Shareholders' equity:
Common stock, no par value, 300,000
shares authorized;
141,689 and 136,017 shares issued;
141,181 and 135,908 shares outstanding
in 2006 and 2005, respectively 1,125,371 874,972
Accumulated other comprehensive income 7,002 4,405
Retained earnings 309,467 486,299
Total shareholders' equity 1,441,840 1,365,676
Commitments and contingencies
Total liabilities and shareholders'
equity $2,078,805 $1,889,296
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
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Whole Foods Market, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Forty weeks ended
------------------------
July 2, July 3,
2006 2005
---------- ----------
Cash flows from operating activities
Net income $ 164,027 $ 127,291
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 118,648 101,009
Loss (gain) on disposition of assets (1,001) 4,844
Share-based compensation 4,383 1,742
Deferred income tax expense (benefit) (19,073) (1,943)
Excess tax benefit related to
exercise of employee stock options (55,494) 42,358
Interest accretion on long-term debt 367 3,977
Deferred rent 13,547 15,914
Other 595 5,197
Net change in current assets and
liabilities:
Trade accounts receivable (2,089) 1,170
Merchandise inventories (37,303) (20,654)
Prepaid expense and other
current assets (5,749) (3,996)
Trade accounts payable 17,362 12,023
Accrued payroll, bonus and other
benefits due team members 23,637 24,455
Other accrued expenses 120,161 20,494
Net cash provided by operating activities 342,018 333,881
Cash flows from investing activities
Development costs of new store locations (111,482) (152,794)
Other property, plant and equipment
expenditures (86,335) (82,159)
Acquisition of intangible assets (16,204) -
Purchase of available-for-sale securities (497,071) -
Sale of available-for-sale securities 209,110 -
Increase in restricted cash (22,449) (9,924)
Decrease in notes receivable - 13,500
Net cash used in investing activities (524,431) (231,377)
Cash flows from financing activities
Dividends paid (336,889) (37,850)
Issuance of common stock 208,641 70,885
Excess tax benefit related to exercise
of employee stock options 55,494 -
Payments on long-term debt and capital
lease obligations (5,612) (5,872)
Net cash provided by (used in)
financing activities (78,366) 27,163
Net change in cash and cash equivalents (260,779) 129,667
Cash and cash equivalents at beginning
of period 308,524 194,747
Cash and cash equivalents at end of period $ 47,745 $ 324,414
Supplemental disclosure of cash flow information:
Interest paid $ 531 $ 910
Federal and state income taxes paid $ 18,679 $ 48,431
Non-cash transactions:
Conversion of convertible debentures
into common stock $ 4,910 $ 147,302
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
-7-
Whole Foods Market, Inc.
Non-GAAP Financial Measures (unaudited)
(In thousands)
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 is a tabular
reconciliation of this non-GAAP financial measure to GAAP net income, which the
Company believes to be the most directly comparable GAAP financial measure.
Twelve weeks ended Forty weeks ended
----------------------- -----------------------
July 2, July 3, July 2, July 3,
EVA 2006 2005 2006 2005
- -------------------------- ---------- ---------- ---------- ----------
Net income $ 53,898 $ 40,387 $ 164,027 $ 127,291
Provision for income taxes 35,931 26,924 109,351 84,860
EVA adjustments* 4,176 4,091 10,780 9,409
NOPBT 94,005 71,402 284,158 221,560
Income taxes (40%) 37,602 28,561 113,663 88,624
NOPAT 56,403 42,841 170,495 132,936
Capital Charge 35,815 33,225 114,413 105,310
EVA $ 20,588 $ 9,616 $ 56,082 $ 27,626
* GAAP amounts not included in EVA include interest expense, gains and losses
on the disposition of assets, accelerated depreciation and share-based
compensation.
SOURCE Whole Foods Market, Inc.
-0- 07/31/2006
/CONTACT: Cindy McCann, VP of Investor Relations of
Whole Foods Market, Inc., +1-512-542-0204/
/Web site: http://www.wholefoodsmarket.com /
(WFMI)
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Whole Foods Market, Inc. 550 Bowie Street Austin, Texas 78703
512.477.5566 fax 512.482.7204
http://www.wholefoodsmarket.com
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