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Wild Oats Profitable for Q2, but Still In Red for Half

BOULDER, Colo. -- A strong performance of its banner stores and square footage growth lifted second-quarter sales for natural and organic retailer Wild Oats Markets, Inc. 13.1 percent to $284.6 million, compared with last year's $251.7 million for the same time period.

Weighted average square footage in the second quarter was 2.52 million square feet, an increase of 12.5 percent compared with weighted average square footage of 2.24 million in last year's second quarter. The addition of four new stores and two relocated stores in the first half of 2005 helped to drive the increase in net sales.

First-half 2005 net sales were $562.7 million, a 9.2 percent increase compared with $515.5 million in the same period last year.

"We are very pleased with the continued strengthening of our sales momentum throughout the first half of the year," said Perry D. Odak, president and c.e.o. of Wild Oats. "Now that we're into the third quarter and the lapping of the Southern California grocery strike is behind us, we expect our comparable-store sales to be solid throughout the remainder of the year. Additionally, our Wild Oats branded products rollout continues to exceed our expectations and is producing very strong sales, which is also contributing to our gross-margin improvement."

Comparable-store sales for the second quarter are 5.4 percent -- stronger than the retailer expected, especially in comparison with last year’s 1.5 percent second-quarter comps.

Excluding the company's Southern California stores, "which continued to lap difficult strike-related comparisons through the end of the second quarter," comparable-store sales were 7.9 percent compared with 0.1 percent.

As a result of year-to-date sales performance, the retailer expects comps for the full year to be at the high end of its previously stated range of 3 percent to 4 percent.

Thanks to strong sales, a sequential increase in gross margins, and a higher store contribution, net income was $0.9 million for the second quarter, or three cents per share, compared to a net loss of $0.3 million, or one cent per share last year.

For the first half, however, Wild Oats is still in the red, with a net loss of 2005 at $0.2 million, or one cent per share, compared with net income of $1.7 million, or six cents per share, for 2004. Due to the improvement in the second quarter, the company has increased guidance for its full-year 2005 earnings per share to be in the two-cent to four-cent range, an increase from its previous range of break-even to three cents.

During the second quarter, Wild Oats opened a new Henry's store in Temecula, Calif. and relocated a Wild Oats store in the Portland, Ore. market. To date, these two new store openings have produced the strongest grand opening results in both the Henry's and Wild Oats chains. Wild Oats Markets plans to open an additional three new Henry's stores throughout the remainder of the year, bringing the total number of new stores opened in 2005 to nine. Currently Wild Oats has 17 leases or letters of intent signed for new stores opening in the remainder of this year, in 2006 and 2007.

The retailer also completed the major remodeling of two San Diego Henry's stores in July and expects to complete major remodels of five additional stores by the end of the year.

Wild Oats Markets is also pursuing additional retail opportunities to offer its Wild Oats branded products in other retail environments. In the second quarter, Wild Oats opened the first of its five-store test of a branded Holistic Health boutique in the Plymouth, Mass. Stop & Shop store. The second Wild Oats Stop & Shop department will open in the third quarter in Fairfield, Conn.

Wild Oats has also added Dan Bolstad to its management team as s.v.p. of operations. Bolstad brings to the company more than 25 years of operations and management experience in the food retail industry. Most recently he was s.v.p. of operations for ShopKo Stores in Green Bay, Wis., a 140-store chain of multidepartment retail stores. Bolstad spent most of his career at Fred Meyer Stores, a grocery and general merchandise retailer in the Pacific Northwest, where he served as s.v.p. of operations from 2001 to 2003.
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