Whole Foods market (WFMI), the largest US-based retailer of natural and organic foods, said this is the first time in its history to record over US$1 billion in sales in a quarter and due to the strong growth has raised its earnings forecast for the year.
FY04 Q1 revenues increased 21% to US$1.1 billion from US$0.9 billion in the same quarter last year due to an 8% increase in square footage growth and a 14.7% increase in same store sales growth. Its earnings for the period grew 51% to a record US$38.7 million from US$25.6 million, or to US$0.60 per share from US$0.42 per share.
In Southern California, members of the United Food and Commercial Workers union were on strike during the last fourteen weeks of the sixteen-week quarter. Nineteen of the Company's stores experienced an increase in sales due to the strike, 17 of which are in the comparable store base. Excluding the stores positively impacted by the strike, comparable store sales increased 12.8% for the quarter.
The Company attributes the above-average increase in net income and earnings per share to the stronger-than-expected sales across the country, a positive contribution from the Harry's stores and facilities compared to a loss in the prior year, and lower pre-opening expenses of $1.8 million compared to $3.8 million in the prior year. Additionally, last year's first quarter results included a pre-tax impairment charge of $1.4 million related to the Company's investment in Gaiam, Inc. compared to a loss of approximately $0.5 million relating to the sale of the Company's investment in Gaiam Inc. during the first quarter this year.
"This was one of the best quarterly performances in our 23-year history. For the first time, our sales for the quarter surpassed $1 billion. Our 12.8% comparable stores sales increase, excluding the strike-impacted stores, was well above our 10-year average of 8.5%, and this was on top of a 10.5% comparable store sales increase in the prior year," said John Mackey, Whole Foods Market CEO, President, Chairman and Co-founder. "We translated our 21% sales growth into a 45% increase in diluted earnings per share, and due to our strong results this quarter we are raising our guidance for the fiscal year."
The Company opened its second New York City store located at Columbus Circle on February 5, 2004 and will open its first store in Louisville, KY on February 12, 2004. The Company expects to open one additional store during the second quarter in Colorado Springs, CO.
"Our 59,000 square foot Columbus Circle store is the largest supermarket in Manhattan and is receiving an incredibly positive reaction," said John Mackey. "Interest has been so high that over the past weekend customers had to wait for people to leave the store before more were allowed to enter. While we certainly expect some of the curiosity to level off, we expect this store to set a company record for first-week sales, and we believe it will quickly become our top-volume store."
The Company is pleased to announce the recent signing of seven new store sites in Birmingham, AL; Hollywood and Thousand Oaks, CA; Coral Gables, FL; Omaha, NE; Swampscott, MA; and Toronto, Canada. The following table provides additional information about the Company's stores in development.
Goals for Fiscal Year 2004:
The Company continues to expect total sales growth for fiscal year 2004 in the range of 15% to 20%. The Company expects weighted average year-over-year square footage growth for the year of 10%, including 41,000 square feet related to the expansion of six existing stores. Square footage growth is expected to be higher in the second half of the fiscal year as the Company plans to open four new stores in the first half of the year and nine to ten new stores, including one Fresh & Wild store and a relocation of an existing store, in the second half of the fiscal year. The Company now expects its Union Square store in New York City to open late in the first quarter of fiscal year 2005, rather than in fiscal year 2004, due to delays in the developer delivering the site to the Company.
The Company is initiating a guidance range for second quarter comparable store sales growth of 11% to 14%. This is higher than the Company's historical performance, reflecting continued strong sales momentum across the country, some positive sales benefit from the ongoing strike, Easter shifting from the third quarter last year to the second quarter this year, and a below- average 7% comparable store sales increase in the prior year. The Company expects comparable store sales growth for the second half of the year to be in range of 8% to 10% assuming the strike in Southern California has ended and noting the increasingly tougher year-over-year comparisons.
The Company continues to expect operating margin improvement in fiscal year 2004 primarily due to slight improvements in gross profit, direct store expenses and G&A as a percentage of sales.
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