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Whole Foods Market Reports Second Quarter Results

AUSTIN, Texas, May 4, 2011 (GLOBE NEWSWIRE) -- Whole Foods Market, Inc. (Nasdaq:WFMI) today announced a change in its trading symbol to "WFM" from "WFMI" effective May 6, 2011 and reported results for the 12-week second quarter ended April 10, 2011. Sales for the quarter increased 12% to $2.4 billion. Comparable and identical store sales increased 7.8%, or 16.5% and 15.5% on a two-year stacked basis, respectively, including a negative impact of 50 basis points from Easter shifting from the second quarter last year to the third quarter this year. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 14% from the prior year to $208.3 million, net income increased 33% to $89.9 million, and diluted earnings per share increased 29% to $0.51. Results included a LIFO charge of $1.0 million versus a credit of $3.0 million in the prior year; a gain of $3.2 million in the prior year from the sale of a non-operating property; net interest income of $0.7 million versus net interest expense of $5.9 million in the prior year; and an effective tax rate of 37.0% versus 40.5% in the prior year.  
/ Source: GlobeNewswire

AUSTIN, Texas, May 4, 2011 (GLOBE NEWSWIRE) -- Whole Foods Market, Inc. (Nasdaq:WFMI) today announced a change in its trading symbol to "WFM" from "WFMI" effective May 6, 2011 and reported results for the 12-week second quarter ended April 10, 2011. Sales for the quarter increased 12% to $2.4 billion. Comparable and identical store sales increased 7.8%, or 16.5% and 15.5% on a two-year stacked basis, respectively, including a negative impact of 50 basis points from Easter shifting from the second quarter last year to the third quarter this year. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 14% from the prior year to $208.3 million, net income increased 33% to $89.9 million, and diluted earnings per share increased 29% to $0.51. Results included a LIFO charge of $1.0 million versus a credit of $3.0 million in the prior year; a gain of $3.2 million in the prior year from the sale of a non-operating property; net interest income of $0.7 million versus net interest expense of $5.9 million in the prior year; and an effective tax rate of 37.0% versus 40.5% in the prior year.  

"These are the strongest overall results we have reported in the past five years.  Our solid execution is generating consistent cash flow, and with our long-term debt now fully repaid, we are considering other uses for our growing cash balance, including accelerating our growth, raising our dividend and repurchasing stock," said John Mackey co-founder and co-chief executive officer of Whole Foods Market. "We are very proud of our balance sheet and that, despite a much tougher year-ago comparison, we are reporting our sixth consecutive quarter of accelerating two-year identical store sales growth.  Based on our results for the quarter, we have raised our earnings outlook by $0.10 for the year."

The following table shows the Company's comparable and identical store sales results for the last five quarters and for the five weeks ending May 1, 2011.

 * Comparable and identical store sales growth includes a 50 basis point negative impact from the Easter shift.

** Results include Easter week in both the current and prior year.

For the quarter, the LIFO charge was $1.0 million versus a credit of $3.0 million in the prior year, a negative impact of 18 basis points. Excluding LIFO, gross profit increased 53 basis points to 35.6% of sales driven by an improvement in both occupancy costs and cost of goods sold as a percentage of sales. Direct store expenses improved 31 basis points to 25.9% of sales due to leverage in wages, depreciation and healthcare costs as a percentage of sales.  As a result, store contribution, excluding LIFO, improved 84 basis points to 9.8% of sales.

For stores in the identical store base, gross profit improved 66 basis points to 35.7% of sales, direct store expenses improved 50 basis points to 25.7% of sales, and store contribution improved 116 basis points to 10.0% of sales.

G&A expenses increased 25 basis points to 3.2% of sales due primarily to an increase in salaries and benefits as a percentage of sales.

Pre-opening expenses were $9.5 million versus $11.6 million in the prior year. Relocation, store closure and lease termination costs were $1.0 million versus a credit of $2.7 million in the prior year. Prior-year results included a $3.2 million gain on the sale of a non-operating property. 

Net interest income was $0.7 million versus net interest expense of $5.9 million in the prior year. This change was driven by a $520.8 million decrease in total debt and lower average interest rates compared to the prior year.

The effective tax rate declined to 37.0% versus 40.5% in the prior year due to savings realized by the Company as a result of certain initiatives and investments.

During the quarter, the Company produced $149.8 million in cash flow from operations and invested $78.6 million in capital expenditures, of which $43.9 million related to new stores. This resulted in free cash flow of $71.2 million. In addition, the Company repaid $200 million of its term loan and paid $17.3 million in dividends to shareholders. At the end of the quarter, total cash and cash equivalents, restricted cash, and investments were $721.2 million, and total debt was $208.2 million. Subsequent to the close of the second quarter, the Company repaid the remaining $190 million balance on its term loan and paid $17.6 million in dividends to shareholders.

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

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

Fiscal Year Results

For the 28-week period ended April 10, 2011, sales increased 13% to $5.4 billion. Comparable and identical store sales increased 8.5%, or 14.3% and 13.2% on a two-year stacked basis, respectively, including a negative impact of 24 basis points from Easter shifting from the second quarter last year to the third quarter this year. EBITDA increased 20% to $442.6 million, income available to common shareholders increased 53% to $178.7 million, and diluted earnings per share increased 42% to $1.02. Fiscal-year results included a LIFO charge of $3.0 million versus a credit of $2.8 million in the prior year; store closure reserve adjustments of $0.5 million versus $8.4 million in the prior year; a gain of $3.2 million in the prior year from the sale of a non-operating property; net interest income of $1.0 million versus net interest expense of $14.6 million in the prior year; and an effective tax rate of 38.5% versus 40.7% in the prior year.   

For the fiscal year, the Company produced $402.8 million in cash flow from operations and invested $169.6 million in capital expenditures, of which $89.5 million related to new stores. This resulted in free cash flow of $233.2 million. Year to date through May 4, 2011, the Company has repaid $490 million of its term loan and paid approximately $35.0 million in dividends to shareholders. 

The following table shows the Company's year-to-date results through the second quarter for certain line items compared to its historical five-year ranges and averages.

Growth and Development

The Company opened three stores, including one relocation, in the second quarter and has relocated one store so far in the third quarter. The Company expects to open six additional new stores, including two relocations, in the third quarter. The Company currently has 304 stores totaling approximately 11.5 million square feet. 

Since its first quarter earnings release, the Company has terminated one lease for a 25,000 square foot store in development. The Company also recently signed nine new leases averaging 32,200 square feet in size in Markham, Ontario; Fulham, England; Tampa, FL; Des Moines, IA; Chicago, IL; Riverdale, MD; Wilmington, NC; southern NH; and Knoxville, TN. These stores currently are scheduled to open in fiscal year 2012 and beyond. 

The following table provides additional information about the Company's store openings in fiscal years 2010 and 2011 year to date, leases currently tendered but unopened, and total development pipeline (including leases currently tendered) for stores scheduled to open through fiscal year 2014. 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.

 Outlook for Fiscal Year 2011

The following table provides additional information on the Company's updated 2011 outlook.

For the five-week period ending May 1, 2011, including Easter in both years, identical store sales increased 7.9%.  On a two-year basis, identical store sales increased 16.0%, in line with results for the second quarter excluding the negative impact of the Easter shift.  The low end of the Company's identical store sales guidance for the fiscal year assumes a slight deceleration in identical store sales growth on a two-year basis from the 16.0% two-year idents the Company produced for this five-week period, while the high end assumes an acceleration in two-year identical store sales growth, albeit at a more moderate rate than in the first half of the fiscal year. The Company believes these ranges appropriately reflect marginally tougher comparisons in the second half of the year, while also allowing for the possibility that the Company's 8.5% year-to-date identical store sales growth could be sustained especially given the likelihood of some positive impact from higher inflation.    

Based on its second quarter results and updated assumptions, the Company is raising its diluted EPS range for the year to $1.87 to $1.90, an increase of 31% to 33% year over year.  For the second half of the year, the Company does not expect to produce the same level of year-over-year earnings growth that it has produced year to date. While the Company expects the benefit of net interest income and a lower tax rate to continue in the second half of the year, the Company expects a greater year-over-year increase in pre-opening and relocation expenses of approximately $13 to $16 million; a greater negative change in LIFO of approximately $7 to $8 million year over year; and a year-over-year increase in average diluted shares outstanding of approximately eight million.  In addition, the Company expects lower total sales growth on tougher comparisons, which could make it difficult to leverage costs to the extent the Company did in the first half of the year. The Company notes the fourth quarter is seasonally its weakest quarter of the fiscal year in terms of average weekly sales and store contribution.

The Company is committed to producing positive free cash flow on an annual basis, including sufficient cash flow to fund the 61 stores in its current development pipeline. The following table provides information about the Company's estimated store openings through 2014 based on this pipeline. These openings reflect estimated tender dates, which are subject to change, and do not incorporate any potential new leases, terminations or square footage reductions.

1 Reflects seven openings and one expansion year to date, plus two additional expansions in fiscal year 2011

About Whole Foods Market

Founded in 1980 in Austin, Texas, Whole Foods Market ( www.wholefoodsmarket.com ) is the leading natural and organic foods supermarket, and America's first national certified organic grocer. In fiscal year 2010, the Company had sales of approximately $9.0 billion and currently has 304 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs approximately 61,000 Team Members and has been ranked for 14 consecutive years as one of the "100 Best Companies to Work For" in America by Fortune magazine.

The Whole Foods Market, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6063

Forward-looking statements

The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995.  Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward-looking statements.  These risks include general business conditions, changes in overall economic conditions that impact consumer spending, including fuel prices and housing market trends, the impact of competition, changes in the Company's access to available capital, and other risks detailed from time to time in the SEC reports of Whole Foods Market, including Whole Foods Market's report on Form 10-K for the fiscal year ended September 26, 2010.  Whole Foods Market undertakes no obligation to update forward-looking statements. 

The Company will host a conference call today to discuss this earnings announcement at 4:00 p.m. CT.  The dial-in number is 1-800-862-9098, and the conference ID is "Whole Foods."  A simultaneous audio webcast will be available at www.wholefoodsmarket.com

CONTACT: Cindy McCann VP of Investor Relations 512.542.0204