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Wild Oats Chows Down

The shares rally after it reports a big quarter and guides higher.
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Wild Oats

(OATS)

swung to a better-than-expected profit in the fourth quarter as sales rose and margins widened. It guided higher for 2006.

Shares rallied on the news, jumping $2.41, or 16.5%, to $17.05 on Instinet. With the gain, they're up 41% on the year and about 18% since being

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Wild Oats earned $3.3 million, or 11 cents a share, in the quarter, compared with a loss of $34.7 million, or $1.22 a share, a year ago. Adjusted for charges related to store closings and hurricanes, Wild Oats earned 17 cents a share in the quarter, beating the Thomson First Call consensus estimate by 11 cents.

Sales were $282.7 million, up from $281.9 million a year ago. Analysts had expected $294.1 million. The company said same-store sales rose 4.2% from a year ago while its store space, as measured in square feet, rose 5.5%.

Wild Oats benefited from a 230-basis-piont widening of gross margins to 29.7% in the fourth quarter, reflecting the company's "ability to strike a balance between sales and promotional activity, and its implementation of new merchandising initiatives focused on improving margins."

For 2006, the company expects to earn 34 cents to 40 cents a share, including an expense of 8 cents a share for stock options. Analysts were forecasting earnings of 28 cents a share for the year, according to Thomson First Call. Wild Oats sees its full-year gross margins widening further, to 30%.

"We are optimistic about our prospects for success in 2006," the company said. "We have a solid management team in place, our real estate pipeline is full and we have many new stores in development. In addition to being in the high-growth segment of the food industry, we have built an infrastructure for growth and our investments in distribution and in upgrading our store base are paying off."