Whole Foods Keeps Growing, Just Not As Fast

July 30, 2014

Same-store sales continue to decelerate at Whole Foods as the nation's leading natural and organic grocer continues to face traffic and ticket pressures caused by upstart rivals and established competitors.

Whole Foods sales in the second quarter ended July 6 increased 10% to nearly $3.4 billion from $3 billion the prior year while same store sales increased 3.9%, including a 60 basis points positive impact related to the timing of Easter.  Profits during the quarter increased 6.3% to $151 million, 41 cents a share, compared to prior year profits of $142 million, or 38 cents a share.

"Our business model is producing industry-leading sales per gross square foot, healthy returns on invested capital and strong operating cash flow," said Walter Robb, co-CEO of Whole Foods Market.  "We are seeing signs of stability in our sales trends and believe our strategic initiatives will help generate further momentum and product increasing returns on invested capital over the long term."

The company noted its stores generate average weekly sales of more than $736,000, or more than $1,000 per sq. ft.  Despite the high level of productivity, increased competition and reduced pricing at Whole Foods has put pressure on the company's margins and top line growth.

Both factors were evident earlier this year when the company reported second quarter results on May 6 and lowered its full year expectations for sales and profit growth.  The diminished view caused shares, which had been trading above $50 for most of the year at that time, to decline sharply.  The release of third quarter results and affirmation of the company's previously lowered outlook only served to send shares lower when the company reported results after the market closed on Wednesday.

Source: Retailing Today

Whole Foods' Record Revenue Increase Not Enough For Street

May 7, 2014

Despite the Easter holiday shift, Whole Foods reported second quarter revenue of $3.32 billion, a record increase of 10% from the prior-year quarter.  But the record was not enough for Wall Street, which expected $3.34 billion.

The company's earnings per share of 38 cents for the quarter also came in below expectations of 41 cents per share.

Comparable store sales, including the negative impact of approximately 50 basis points from Easter shifting from the second quarter last year to the third quarter this year, increased 4.5% on top of a 6.9% increase in the prior year.  The spread between comparable store and identical store sales growth for the quarter due to five relocations and one expansion was approximately 50 basis points.

"The rapidly growing demand for fresh, healthy foods affirms our mission for the last 36 years and highlights the increasing growth opportunity ahead of us," said co-founder and co-CEO John Mackey.  "Whole Foods Market is the premier brand in natural and organic foods, with unparalleled quality standards and the broadest selection.  As we continue to innovate and evolve at a fast pace, we are confident in our ability to gain market share and expect our sales to approach $25 billion during the next five years."

Since the end of the first quarter, the company has added eight stores in six new markets.  In the second quarter, the company opened three new stores.  So far in the third quarter, the company has opened one new store and completed its acquisition of four New Frontiers Natural Marketplace stores in Flagstaff, Prescott and Sedona, Arizona; and San Luis Obispo, California.  The company expects to open seven additional stores in the third quarter and another 11 to 14 stores in the fourth quarter.

Whole Foods currently operates 379 stores totaling approximately 14.4 million sq. ft. and expects to cross the 500 store mark in 2017.  Longer term, the company still sees demand for 1,200 Whole Foods Market stores in the United States.

The company has increased its development pipeline to a record 114 stores with the signing of nine new leases, including one relocation, totaling approximately 410,000 sq. ft.  These leases include three new markets and are located in Fayetteville, Arizona; Honolulu, Hawaii; Indianapolis, Indiana; Metuchen, New Jersey; Chappaqua, New York; Lower Gwynedd Township, Pennsylvania; Fort Worth, Texas; and Richmond, Virginia.

Looking ahead, the company is revising its fiscal year 2014 outlook and now expects sales growth of approximately 11%, comparable store sales growth of 5% to 5.5% and diluted earnings per share of $1.52 to $1.56.

The company expects the Easter shift to positively impact comparable store sales growth in the third quarter by approximately 50 basis points.

Source: Retailing Today