Whole Foods Market Reports FY09 Q4 Results

Whole Foods Market, Inc., 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, 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.

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.

About Whole Foods Market

Founded in 1980 in Austin, Texas, Whole Foods Market (www.wholefoodsmarket.com) is the leading natural and organic foods supermarket, America's first national certified organic grocer, and was named "America's Healthiest Grocery Store" in 2008 by Health magazine. In fiscal year 2008, the Company had sales of approximately $8 billion and currently has 286 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs more than 52,000 Team Members and has been ranked for 12 consecutive years as one of the "100 Best Companies to Work For" in America by Fortune magazine.

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 but are not limited to general business conditions, the successful integration of acquired businesses into our operations, 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 28, 2008. 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.

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