Whole Foods Reports Third-quarter Results

AUSTIN, Texas - Whole Foods, Inc. yesterday reported that for the third quarter ended July 4, sales for the 12-week quarter went up 22 percent to $917 million, compared with $749 million in the prior year. This increase was the result of 9 percent weighted average year-over-year square footage growth and comparable-store sales growth of 14.1 percent. Identical-store sales (excluding two relocations and two major expansions) surged 13.7 percent for the the quarter.

Net income for the quarter rose 15 percent to $32.9 million from $28.7 million last year, and diluted earnings per share went up 10 percent to 50 cents from 45 cents in the previous year. Excluding the pretax gain of about $3 million, or approximately 3 cents in diluted earnings per share, related to the distribution of proceeds from the sale of Blooming Prairie Cooperative last year, net income for the quarter shot up 22 percent and diluted earnings per share rose 17 percent.

"We are experiencing one of the best years in our company's history with sales increasing 23 percent 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' c.e.o., president, chairman, and co-founder, in a statement. "Our comparable stores are producing record sales increases of 15.2 percent 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."

During the quarter Whole Foods opened five new stores in Charleston, S.C.; White Plains, N.Y.; Fort Collins, Colo.; Bellevue, Wash. and Glendale, Calif. (a relocation), ending the quarter with 160 stores totaling about 5 million square feet. Capital expenditures in the quarter were $62 million, of which $37 million was for new store development. Whole Foods produced cash flow from operations of $57 million during the quarter.

During an earnings conference call yesterday, Mackey spoke optimistically of the future, mentioning the eight new store leases signed during the quarter and that there were now 49 locations under development, a 69 percent increase over last year. "We're building a record pipeline of new stores," he said, noting that "the best is yet to come." When asked to explain the phenomenal success of the company, Mackey replied, "Demographically, the world continues to move in Whole Foods' direction," citing growing consumer interest in health, wellness, and longevity as a factor in higher sales.

"Our brand awareness is beginning to penetrate into the mainstream consciousness of America," Mackey continued, adding that larger stores of 50,000 square feet and up "are doing so well for us...They really allow us to tap into a more mainstream market in a way that [our] smaller stores do not."

When asked to comment on possible U.K. locations, Mackey declined to go into specifics, but did say that early reports of large sites being difficult to find in London had proved unfounded, and that in the next quarter or two he hoped to announce the opening of some big stores in the U.K. market.
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