Increased numbers of customers in Southern California boosted sales and income at the two leading naturals supermarket chains, but changes in American eating habits may bode even better for the industry over time, Wall Street watchers said.
Both Wild Oats Markets and Whole Foods Market credited current obsessions with healthier eating and food safety for bringing in new customers and for increasing the purchases of existing customers.
"I think we have the wind at our backs in this industry," Wild Oats chief executive Perry Odak said in a conference call May 5. "When something comes up about mad cow or something similar, it drives more people to our stores."
Wild Oats reported $263.8 million in net sales for the first quarter ended March 27, up 11.8 percent from the year-ago same quarter. Earnings were $2.36 million, or 8 cents a share.
On May 4, Whole Foods Market reported earnings of $35.3 million, or 54 cents a share, on sales of $902.1 million for the second quarter ended April 11. Same-store sales were up 17 percent from last year. Chief Executive John Mackey told analysts that Whole Foods expects to retain 30 percent of the increased traffic in Southern California.
Gregory Badishkanian, who covers natural retailer stocks for Smith Barney in New York, on April 6 upgraded Wild Oats to "buy," based on what he called "evidence of its likely turnaround," including a serious upgrade program for underperforming stores, good results from its new store formats and "one of the best management teams within the food retailing and specialty foods industries."
Wild Oats' shift back to United Natural Foods as its primary distributor has gone well, said Badishkanian, adding he expects the chain will retain as much as 35 percent of the strike-related increases in California.