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Whole Foods Market Reports First Quarter Results

For stores in the identical store base, gross profit improved 46 basis points to 34.8% of sales, direct store expenses improved 54 basis points to 26.1% of sales, and store contribution improved 100 basis points to 8.7% of sales .

G&A expenses increased seven basis points to 2.9% of sales due primarily to higher wages as a percentage of sales.

Pre-opening expenses were $8.6 million versus $12.8 million in the prior year, including pre-opening rent of $4.9 million versus $7.6 million in the prior year. Relocation, store closure and lease termination costs were $3.1 million versus $12.4 million in the prior year. This included store closure reserve adjustments of $1.0 million versus $10.1 million in the prior year.

Net interest income was $0.3 million versus net interest expense of $8.8 million in the prior year driven by a $326 million decrease in total debt and a $186 million increase in cash and investments year over year.

During the quarter, the Company produced $253.0 million in cash flow from operations and invested $91.0 million in capital expenditures, of which $45.6 million related to new stores. This resulted in free cash flow of $162.0 million. In addition, the Company repaid $100 million of its term loan maturing in August 2012. At the end of the quarter, total cash and cash equivalents, restricted cash, and investments were $762.0 million, and total debt was $408.3 million. Subsequent to the close of the first quarter, the Company repaid another $200 million of its term loan, leaving $190 million currently outstanding. The Company also reinstated its quarterly cash dividend at $0.10 per share, paying $17.3 million to shareholders on January 20, 2011.

Additional information on the quarter for comparable stores and all stores is provided in the following table. 

Comparable  Stores Comps   NOPAT ROIC 1   # of Stores   Average Size   Total Square Feet
Over 14 years old (18.9 years old, s.f. weighted) 3.3%   92%    56   26,200   1,467,000
Between 11 and 14 years old 8.9%   74%    62   30,500   1,891,000
Between eight and 11 years old 7.8%   59%   49   33,200   1,625,700
Between five and eight years old 8.3%   46%   50   42,100   2,106,700
Between two and five years old 14.9%   10%   54   53,900   2,908,400
Between one and  two years old (no relocations) 14.6%   8%   14   47,000   657,600
All comparable stores (8.6 years old, s.f. weighted) 9.1%   36%   285   37,400   10,656,400
All stores (8.1 years old, s.f. weighted)     31%   302   37,700   11,391,600

  1 Reflects store-level capital and net operating profit after taxes ("NOPAT"), including pre-opening expense

The following table shows the Company's first quarter results for certain line items compared to its historical five-year ranges and averages, which reflect the Wild Oats acquisition in August 2007.

     FY06-FY10 Range   FY06-FY10    
     Low High   Average   1Q11
Sales growth   1.0% 23.6%   14.2%   13.8%
Comparable store sales growth   -3.1% 11.0%   5.4%   9.1%
Identical store sales growth   -4.3% 10.3%   4.4%   9.1%
Ending square footage growth   6% 46%   15.0%   6.0%
Percent of sales from new & relocated stores   7% 9%   7%   4%
Gross profit   34.0% 34.9%   34.6%   34.6%
Direct store expenses   25.4% 26.7%   26.3%   26.3%
Store contribution   7.5% 9.6%   8.3%   8.3%
G&A expenses   3.0% 3.4%   3.2%   2.9%

Growth and Development

The Company opened three stores and expanded one store by 29,000 square feet in the first quarter. The Company expects to open three new stores, including one relocation, in the second quarter. The Company currently has 302 stores totaling approximately 11.4 million square feet. 

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