Whole Foods Q2 Profits Dip

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Whole Foods Q2 Profits Dip

AUSTIN, Texas -- Whole Foods Market, Inc. here posted an 11.6 percent sales increase for the 12-week quarter ended April 8, 2007. However, its net income fell 11.2 percent to $46 million, due in part to the cost of new store openings.

Chairman, c.e.o., and co-founder John Mackey didn't seem to be too concerned yesterday. "We opened a record six new stores during the quarter, which brings us to 15 opened over the last 12 months, and we are still on track to open more stores this fiscal year than we ever have," he said in a statement. "We are very excited to see the acceleration in our new store openings materialize, as some of these are incredibly exciting stores that will allow us to redefine the marketplace and further differentiate our shopping experience from other food retailers. In addition, our new stores open at least one year continue to outperform our sales and ROIC projections, and we expect these new stores to be strong drivers of our future sales and earnings growth."

The chain said that members of the U.S. Federal Trade Commission staff have voiced concerns over its plan to buy rival Wild Oats Markets, Inc., and that the FTC has not yet decided whether to challenge the $565 million deal.

Sales for the quarter increased 11.6 percent to $1.5 billion, driven by 12 percent ending square footage growth and a 6.0 percent increase in comparable store sales on top of an 11.9 percent increase in the prior year. Identical store sales (excluding four relocated stores and three major expansions) increased 5.1 percent.

For the quarter, pre-opening and relocation costs were $15.6 million, compared to $7.3 million in the second quarter last year. Approximately $6.4 million relating to share-based compensation, pre-opening rent, and accelerated depreciation was expensed for accounting purposes but was non-cash, compared to $3.9 million in the prior year.

During the quarter, the company produced $67 million in cash flow from operations and received $14 million in proceeds from the exercise of stock options.

Capital expenditures were $102 million, of which $77 million was for new stores, and the company paid approximately $25 million to shareholders in cash dividends. At the end of the quarter, the company had total cash and investments of approximately $170 million and total long-term debt of approximately $3 million.

For the 28-week period ended April 8, 2007, sales increased 11.9 percent to $3.3 billion driven by 12 percent ending square footage growth and comparable store sales growth of 6.6 percent. Sales in identical stores (excluding four relocated stores and three major expansions) increased 5.7 percent. Net income was $99.7 million.

The company said it has recently signed nine new store leases averaging 42,000 square feet in size in the following locations: Capitola, Calif.; Lafayette, Calif.; Palm Desert, Calif.; San Francisco, Calif.; Santa Rosa, Calif.; Basalt, Co.; Honolulu, Hawaii; Ann Arbor, Mich.; and Yonkers, N.Y.

For fiscal year 2007, on a 52-week to 52-week basis, the company expects total sales growth of 13 percent to 17 percent and comparable store sales growth of 6 percent to 8 percent.

Longer term, Whole Foods said its goal is to reach $12 billion in sales in fiscal year 2010.