Whole Foods Posts 20 Percent Sales Growth for 1Q02

Whole Foods Posts 20 Percent Sales Growth for 1Q02

AUSTIN, Texas--An increase in same-store sales for WholeFoods (NASDAQ:WFMI) led to a 20 percent increase in overall sales for thecompany's first quarter of 2002 (1Q02), ended Jan. 20. Sales were up 21.3percent to $780.8 million compared to $643.4 million reported in 1Q01. Grossmargin held relatively steady at 33.9 percent of sales, while general andadministrative costs posted at 3.6 percent of sales, down slightly from 1Q01's3.7 percent of sales. Net income rose 33.9 percent to $20.1 million, or $.36 pershare earned, from $15.0 million, or $.28 per share earned. According to thecompany, first quarter earnings were a penny better than analysts' estimates.

The company stated three factors helped increase sales growth for 1Q02,including a rise in same-store sales by 9.4 percent: 1) an increase in customerswith smaller basket size than core customers; 2) better merchandising andmarketing of "365 everyday value" private label lines; and 3)consumers trading down to value-priced items and shopping more often but buyingless per shopping trip. WFMI also reported that the chain is appealing to abroader customer mix than five years ago due to larger stores and its perishablesections, attracting more mainstream customers.

"For the ninth consecutive quarter, we delivered top line growth of over20 percent driven by impressive sales at both our new and existing stores,"reported John Mackey, chairman, president and chief executive officer of WholeFoods Market. The company stated this was due to growth in square footage andsame-store growth. "New stores produced average weekly sales of $380,000,and our comparable store sales increases continue to be the highest for publicsupermarket companies and among the highest in retailing overall." Duringan investor conference on Feb. 13, Mackey added, "Seven or eight years agowe didn't have any stores doing $380,000 a week, much less averaging thatamount."

Even though the economy as a whole is suffering, WFMI reported various trendsare emerging that helped its top line. The company credited increased preparedfood sales for overall revenue growth, a trend that shows people are staying inmore instead of eating out. Also, people are shopping specials in the meatdepartment "a bit harder" than usual.

By cashing in on America's increased focus on value, the company hascontinued to open new stores while closing unprofitable ones. During 1Q02, WFMIacquired three stores, opened one new store, relocated another one and closedtwo stores. So far for the second quarter, the company opened one new store,plans to open two additional stores, signed the lease for another one and has 20stores in development with an average store size of 36,000 square feet. Thecompany will be posting expenses for these stores as they occur, according toWFMI. As of the end of 1Q02, WFMI had approximately $256 million in totallong-term debt and $129 million in available credit.

Today, Merrill Lynch and Deutshe Banc Alex Brown Inc. upgraded WFMI's stockfrom "neutral" to "buy" and "strong buy,"respectively. The 1Q02 numbers were released late Feb. 13, and by the timemarkets closed Feb. 14, WFMI stock had increased 9.75 percent (or $3.69) to$41.55 per share.