Nov. 4, 2009 (PR Newswire) -- AUSTIN, Texas, Nov. 4 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc. (NASDAQ: WFMI) today reported results for the 12-week fourth quarter and 52-week fiscal year ended September 27, 2009.

Sales for the quarter increased 2.3% to $1.8 billion. Comparable store sales decreased 0.9% versus a 0.4% increase in the prior year. Identical store sales, excluding eight relocations and two major expansions, decreased 2.3% versus a 0.5% decrease in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 0.7%, and identical store sales decreased 2.0%.

For the fourth quarter, income available to common shareholders was $28.7 million, or $0.20 per diluted share, compared to $1.5 million, or $0.01 per diluted share, for the fourth quarter last year. Results in the current quarter included a LIFO credit of $3.4 million, or $0.01 per diluted share.

Results in the fourth quarter last year included: a LIFO charge of $4.7 million, or $0.02 per diluted share; non-cash asset impairment charges related to two Wild Oats locations of $1.5 million, or $0.01 per diluted share; FTC-related legal expenses of $2.5 million, or $0.01 per diluted share; charges related to lease terminations of Whole Foods Market stores in development and store closure reserve adjustments related to idle Wild Oats properties of $20.2 million, or $0.07 per diluted share; and tax charges resulting from the repatriation of $60 million in cash from the Company's Canadian subsidiary of $6.1 million, or $0.04 per diluted share.

"We believe our sales have stabilized and officially turned the corner. Our comparable store and identical store sales trends improved for the second quarter in a row and, after five quarters of year-over-year declines, so far in the first quarter are up 1.6% and 0.4%, respectively," said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. "We are very pleased with the $273 million of free cash flow we generated this year along with the significant year-over-year improvements we produced in our balance sheet. Our total cash increased $470 million to $501 million, and total debt decreased $190 million to $739 million. From where we stand today, we believe we are well positioned to meet our long-term debt maturities in 2012."

Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") increased 46% to $133.5 million, and earnings before interest, taxes, depreciation and other non-cash expenses ("EBITANCE") increased 34% to $142.8 million. Approximately $74.0 million relating to depreciation and amortization, asset impairments, LIFO, share-based payments, and deferred rent was expensed for accounting purposes but was non-cash in the current quarter.

During the quarter, the Company produced $113.0 million in cash flow from operations and invested $62.5 million in capital expenditures, of which $51.1 million related to new stores. This resulted in free cash flow of $50.5 million. Cash and cash equivalents, including restricted cash, increased to $501.2 million, and the Company had $335.2 million available on its credit line, net of $14.8 million in outstanding letters of credit. The Company's total debt was $739.2 million.

For the 52-week period ended September 27, 2009, sales increased 1.0% to $8.0 billion. Comparable store sales decreased 3.1% versus a 4.9% increase in the prior year, and identical store sales, excluding 12 relocations and three major expansions, decreased 4.3% versus a 3.6% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 2.6%, and identical store sales decreased 3.7%.

For the fiscal year, the tax rate was 41.5%, income available to common shareholders was $118.8 million, and diluted earnings per share were $0.85. These results included:

--  a LIFO credit of $5.6 million, or $0.02 per diluted share;
--  non-cash asset impairment charges related to operating stores of $14.8
million, or $0.06 per diluted share;
--  FTC-related legal costs of $14.7 million, and non-cash impairment
charges related to the FTC settlement agreement of $4.8 million, or
$0.08 per diluted share; and

--  store closure reserve adjustments primarily related to changes in
certain sub-tenant income estimates driven by the outlook for the
commercial real estate market of $12.9 million, or $0.05 per diluted
share.

For the fiscal year, adjusted EBITDA increased 16% to $575.6 million, and EBITANCE increased 12% to $619.8 million. The Company produced $587.7 million in cash flow from operations and invested $314.6 million in capital expenditures, of which $248.0 million related to new stores. This resulted in free cash flow of $273.1 million. In addition, the Company paid cash dividends to preferred stockholders of $19.8 million during the fiscal year.

The Company's results for the last five fiscal quarters and comparable and identical store sales results for the current quarter to date are shown in the following table. Where applicable, percentages have been adjusted to exclude asset impairment charges and FTC-related legal costs.

QTD
4Q08    1Q09    2Q09    3Q09    4Q09    1Q10
----    ----    ----    ----    ----    ----

Sales growth                15.5%    0.4%   -0.5%     2.0%    2.3%    5.4%

Comparable store
sales growth                0.4%   -4.0%   -4.8%    -2.5%   -0.9%    1.6%

Excluding foreign
currency                  0.4%   -3.4%   -4.1%    -2.0%   -0.7%    1.4%

Two-year comps
(sum of two years)          8.6%    5.3%    1.9%     0.1%   -0.6%   -0.5%

Excluding foreign
currency                  8.4%    5.6%    2.5%     0.5%   -0.2%    0.0%

Identical store
sales growth               -0.5%   -4.9%   -5.8%    -3.8%   -2.3%    0.4%
Excluding foreign
currency                 -0.4%   -4.2%   -5.1%    -3.3%   -2.0%    0.3%

Two-year idents
(sum of two years)          5.6%    2.2%   -0.7%    -1.9%   -2.8%   -2.9%
Excluding foreign
currency                  5.5%    2.6%   -0.1%    -1.5%   -2.4%   -2.4%

Gross profit                33.3%   33.4%   34.7%    35.2%   34.2%
Gross profit
excluding LIFO           33.6%   33.5%   34.7%    34.8%   34.0%

Direct store expenses       26.6%   26.4%   26.2%(1) 26.6%   26.9%

Store contribution           6.8%    6.9%    8.5%     8.5%    7.3%
Store contribution
excluding LIFO            7.0%    7.1%    8.5%     8.2%    7.2%

G&A expenses                 2.9%    2.9%    2.9%     2.8%    2.8%

(1) Unusually low number of workers' compensation claims and average cost
per claim in the quarter

For the quarter, gross profit, excluding LIFO, increased 46 basis points to 34.0% of sales, with an improvement in cost of goods sold more than offsetting higher occupancy costs as a percentage of sales. The LIFO adjustment was a $3.4 million credit versus a $4.7 million charge last year, a positive impact of 45 basis points. Excluding asset impairment charges of $1.5 million last year, direct store expenses increased 32 basis points to 26.9% of sales driven by increases in health care and depreciation which were partially offset by an improvement in workers' compensation expense as a percentage of sales. As a result, store contribution, excluding LIFO and asset impairment charges, improved 13 basis points to 7.2% of sales.

For stores in the identical store base, gross profit, excluding LIFO, improved 47 basis points to 34.1% of sales, direct store expenses improved 11 basis points to 26.5% of sales, and store contribution improved 58 basis points to 7.6% of sales.

G&A expenses, excluding FTC-related legal costs, improved 12 basis points to 2.8% of sales. FTC-related legal costs totaled $0.5 million in the fourth quarter versus $2.5 million in the prior year.

Pre-opening expenses were $10.6 million versus $15.2 million in the prior year.

Relocation, store closure and lease termination costs were $3.2 million versus $27.2 million last year. Results in the prior year included $5.5 million in charges related to lease terminations of Whole Foods Market stores in development and $14.7 million in store closure adjustments related to idle Wild Oats properties.

Additional information on the quarter for comparable stores and all stores is provided in the following table.

NOPAT       # of    Average     Total
Comparable Stores        Comps    ROIC(1)    Stores    Size    Square Feet
-----------------        -----    -------    ------   -------  -----------
Over 11 years old
(15.6 years old,
s.f. weighted)          -2.1%      68%        97      26,900    2,612,800
Between eight and
11 years old            -2.2%      43%        56      32,000    1,792,800
Between five and
eight years old         -4.5%      41%        43      37,300    1,603,700
Between two and five
years old               -0.1%       9%        53      50,800    2,694,000
Less than two years old
(including eight
relocations)            13.8%      -2%        25      54,100    1,352,300
-----------------------  -----      ---        --      ------    ---------

All comparable stores
(7.8 years old, s.f.
weighted)               -0.9%      24%       274      36,700   10,055,600
All stores (7.4 years
old, s.f. weighted)                21%       284      37,200   10,565,800

(1) Reflects store-level capital and net operating profit after taxes
("NOPAT"), including pre-opening expense

Growth and Development

The Company opened three stores in the fourth quarter. So far in the first quarter of fiscal year 2010, the Company has opened three stores in San Francisco, CA; Santa Barbara, CA; and Seattle, WA and closed one former Wild Oats store in Littleton, CO. The Company currently has 286 stores totaling 10.6 million square feet. Two additional stores are expected to open in the first quarter.

Since the Company's third quarter earnings release, the Company has reduced the size of two stores in development by an average of 16,200 square feet each. The Company also recently signed three new leases in Huntington Beach, CA; Columbus, OH; and Pittsburgh, PA averaging 33,000 square feet in size, all currently scheduled to open after fiscal year 2010.

The following table provides additional information about the Company's store openings in fiscal years 2008 and 2009, leases currently tendered but not opened, and total development pipeline for stores scheduled to open through fiscal year 2013. For accounting purposes, a store is considered tendered on the date the Company takes possession of the space for construction and other purposes, which is typically when the shell of the store is complete or nearing completion. The average tender period, or length of time between tender date and opening date, will vary depending on several factors, one of which is the number of acquired leases, ground leases and owned properties in development, all of which generally have longer tender periods than standard operating leases.

Stores    Stores   Current    Current
Opened    Opened    Leases     Leases
New Store Information                FY08      FY09    Tendered  Signed(1)
---------------------               ------    ------   --------  ---------
Number of stores
(including relocations)                20        15        18          53
Number of relocations                    6         6         1           8
Number of lease acquisitions,
ground leases and owned properties      4         4         4           4
New markets                              3         1         4           7
Average store size
(gross square feet)                53,000    53,500    43,500      44,800

Total square footage             1,060,700   801,800   783,800   2,409,700
Average tender period in months        9.7      12.6
Average pre-opening expense per
store (incl. rent)               $2.5 mil  $3.0 mil
Average pre-opening rent
per store                        $1.1 mil  $1.3 mil

(1) Includes leases tendered

FTC Update

As previously announced on June 1, 2009, the FTC approved a settlement agreement resolving its antitrust challenge to the Company's acquisition of Wild Oats Markets, Inc.