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Whole Foods Scores Double Digit Sales, Comps in '05; Profits Dip in Q4

AUSTIN, Texas -- Whole Foods Market, the country's leading organic and natural foods retailer, topped even its own expectations in 2005, as it saw a 22 percent sales increase for the year that totaled $4.7 billion. Based on its strong sales trend in the last few years and its outlook for future growth, the company is raising its 2010 sales goal from $10 billion to $12 billion.

Sales growth for the fourth quarter hit the retailer's mark, with a 20 percent increase to $1.1 billion driven by 12 percent weighted average square footage growth and comparable store sales growth of 13.4 percent. However, net income fell to $9.1 million, or 13 cents a share, from $28.2 million, or 43 cents, a year earlier. Profit for the quarter was cut by a $16.5 million charge related to Hurricane Katrina and $18.2 million in stock-option expenses. The company estimated that the negative sales impact from Hurricane Katrina was in line with its previously announced estimate of $5 million to $6 million. Sales in identical stores (excluding three relocated stores) increased 11.9 percent for the quarter.

For the fiscal year ended Sept. 25, sales increased 22 percent to $4.7 billion, driven by square footage growth and comparable store sales growth of 12.8 percent. Sales in identical stores (excluding four relocated stores and two major store expansions) increased 11.5 percent for the fiscal year. Comparable and identical store sales exclude the company's two stores in New Orleans and Metairie for the last five weeks of the fourth quarter, as they were closed due to Hurricane Katrina. Net income, meanwhile, was $136.4 million, compared to $129.5 million a year ago.

"In fiscal 2005, we produced very strong operating results that exceeded our own expectations and our initial guidance, and returned over $55 million to our shareholders," said John Mackey, chairman and c.e.o. of Whole Foods Market, in a statement. "We are confident in our growth potential and our ability to execute on that growth potential, and as such we have increased our sales growth guidance for next fiscal year to 18 percent to 21 percent and our 2010 sales goal from $10 billion to $12 billion."

Mackey also boasted of a 20 percent increase in the company's quarterly dividend to $0.30 per share, a special dividend of $4.00 per share, and a $200 million four-year stock buyback program, along with a two-for-one stock split.

The natural retailer was not immune to natural disaster. It recorded a charge in the fourth quarter for related estimated net losses resulting from Hurricane Katrina. The main components of the $16.5 million charge were estimated impaired assets of approximately $12.2 million, estimated inventory losses of approximately $2.2 million, salaries and relocation allowances for displaced team members, and other costs of approximately $3.7 million, plus a $1 million special donation to the American Red Cross, less accrued insurance proceeds of approximately $2.6 million.

In the fourth quarter, the company opened five new units, ending with 175 stores (including two Louisiana stores which were temporarily closed) totaling approximately 5.8 million square feet. Thus far in its first quarter, the company has opened four new stores in Atlanta; Jericho, N.Y.; Palm Beach Gardens, Fla.; and West Hartford Conn., and plans to open one additional store in Denver, Colo.

Whole Foods said its Metairie, La. store near New Orleans, which was closed following Hurricane Katrina, has recently reopened for business on a limited basis. While the store will require a complete re-building, the company has opened an 11,000-square-foot "store within a store" to provide food to the community while simultaneously rebuilding the perimeter of the store, which it hopes to complete over the next three to six months.

The company continues to feed its store development pipeline with the recent signing of nine new leases representing a total of approximately 549,000 square feet, which are as follows: Chandler, Ariz., (60,000 square feet); Orlando, Fla. (50,000 square feet); Eugene, Ore. (52,000 square feet); Tarzana (Los Angeles suburb), Calif. (56,000 square feet); Plymouth Meeting (Philadelphia suburb), Pa. (65,000 square feet); Dallas, Texas (80,000 square feet); Reading (Boston suburb), Mass. (61,000 square feet); London, U.K. (75,000 square feet); and Connecticut (50,000 square feet).

Whole Foods said it will begin expensing share-based compensation in the first quarter of fiscal year 2006.
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