USA: Whole Foods' Profit Rises 33%

Source: wsj.com
By Annie Gasparro

OrganicPortal NewsRoom

Whole Foods Market Inc.'s focus on natural and organic foods propelled its fiscal first-quarter results, insulating it from the higher food costs and sparse consumer spending that have punished competitors' margins.

The company's profit rose 33% on a strong 8.7% rise in comparable-store sales fueled by an increase in customer visits and some higher prices on items in the stores.

Whole Foods on Wednesday said the momentum has continued in the current quarter with a 9.4% increase in comparable-store sales to date, leading the company to raise its expectations for sales, operating margin and earnings per-share growth this year.

"There are some positive things happening on the economic front which we are hopeful will continue," Chief Executive Walter Robb said on a conference call with analysts. "We have tremendous sales momentum as well as the capital and expense disciplines in place to leverage that momentum to the bottom line."

Whole Foods shares fell in late trading on Wednesday to $77.30 after gaining 2.8%, to $77.93, in 4 p.m. trading on the Nasdaq Stock Market. Through Wednesday's close, the stock had risen 14% over the past three months.

Even though Whole Foods' customers tend to be less sensitive to the retailer's modest price increases, the company expressed concern in November that it had potentially hit a "price ceiling" on some items in the meat and dairy departments. Whole Foods has been working on coming across as more value-oriented as a way to attract those shoppers who are more conscious of the price tag on their groceries.

"We really focused a lot over the holidays on making sure customers really felt comfortable doing their holiday shopping with us, especially given the economic issues going on," said Chief Operating Officer A.C. Gallo.

The result was customer transaction count growth in the first quarter, which included increases in both higher-priced and lower-priced transactions.

The company's operating margin grew to 5.6%, leading it to raise its expectation for the year to 5.9%. Like the rest of the industry, Whole Foods says it expects food cost inflation will moderate as the year progresses.

For the quarter ended Jan. 15, Whole Foods reported a profit of $118.3 million, or 65 cents a share, up from $88.7 million, or 51 cents, in the comparable period a year earlier. Sales rose 13% to $3.39 billion.

The company lifted its fiscal 2012 per share earnings guidance to a range of between $2.28 and $2.32, up from between $2.21 and $2.26.

As part of its growth this year, Whole Foods is building new stores that are smaller and in neighborhoods with lower rent, requiring less of an investment from the company. In those areas, the company faces less high-end grocery competition, so the new stores return a profit faster. Even stores over 15 years old saw comparable-store sales up more than 6%, the company added.

More information: http://www.wholefoodsmarket.com/

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OrganicPortal NewsRoom

14.02.2012

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