Q4 Sales Jump 24 Percent Whole Foods; 'Oats' Deal Drains Profits

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Q4 Sales Jump 24 Percent Whole Foods; 'Oats' Deal Drains Profits

AUSTIN, Tex. -- Organic and natural foods super-chain Whole Foods Market, Inc. is looking downturn-proof these days, posting healthy gains in fourth-quarter sales and comps despite weakened economic conditions in ots core California market and elsewhere in the nation.

The chain said yesterday that sales were up 24.7 percent to $1.7 billion, although net profit fell 15 percent to $33.9 million, or 24 cents a share, in the quarter ended Sept. 30., due in part to costs from its acquisition of Wild Oats Markets.

Sales included approximately $82 million from acquired Wild Oats and Capers stores, and $40 million in sales from the Henry's and Sun Harvest stores that were sold on Sept. 30, 2007.

Comparable store sales increased 8.2 percent, on top of an 8.6 percent increase in the year-ago period. Identical store sales, excluding six relocated stores and two major expansions, increased 6.0 percent on top of an 8.4 percent increase in the prior year. Sales at the Wild Oats stores open longer than one year (excluding the divested and closed stores) increased 3.9 percent during the last five weeks of the quarter.

"Whenever the economy gets weak everybody comes out and says Whole Foods sales are going to fall. However, that's never been the case," said John Mackey, chairman, c.e.o., and co-founder of Whole Foods during a conference call. "We're not seeing any weakness in our California stores due to so-called bubble bursting. We're doing extremely well in California," Mackey added.

"On top of completing the merger with Wild Oats, we opened a record eight new stores and produced an 8 percent increase in comparable stores sales in the fourth quarter," noted Mackey additionally in a statement. "We are very excited about the progress of our integration of Wild Oats and the healthy increase in sales growth we are seeing at the Wild Oats stores from 3.9 percent in Q4 to 6.6 percent quarter to date. We expect these stores, along with our new stores, to drive strong sales this year and strong comparable store sales growth in fiscal year 2009 and beyond."

For the fiscal year, Whole Foods sales increased 15.3 percent to approximately $6.6 billion, and comparable store sales increased 7.1 percent on top of an 11.0 percent increase in the prior year. Sales in identical stores, excluding seven relocated stores and four major expansions, increased 5.8 percent on top of a 10.3 percent increase in the prior year.

Net income was approximately $183 million, earnings per share were $1.29, and operating cash flow per share was $2.81.

For fiscal year 2008, the grocer said it expects sales growth of 25 percent to 30 percent, of which approximately 10 percent is expected to come from the Wild Oats stores, and comparable store sales growth of 7.5 percent to 9.5 percent. It said it expects to open a comparable number of new stores in fiscal year 2008 as in fiscal year 2007.

However, Whole Foods said it "does not expect to produce operating leverage in fiscal year 2008, due primarily to a decrease in store contribution as a percentage of sales driven by a higher percentage of sales from new and acquired stores, investments in labor and benefits at the acquired Wild Oats stores, and continued, though more moderate, increases in health care costs as a percentage of sales."