BOULDER, Colo., Nov 04, 2005 /PRNewswire-FirstCall via COMTEX/ -- Wild Oats Markets, Inc. (OATS), a leading national natural and organic foods retailer, today announced financial results for the third quarter and nine months ended October 1, 2005.
Third Quarter Results:
* The Company reported an 11.1 percent net sales increase to $278.5
* Comparable store sales increased 6.1 percent.
* Net income was $0.00 per diluted share.
* Adjusted EBITDA was $8.2 million versus $1.0 million last year.
* Store contribution increased $7.7 million, or 70.6 percent over last
* Wild Oats opened one new Henry's store in Glendale, Ariz. and
completed the major remodeling of two San Diego area Henry's stores in
Net sales in the third quarter of 2005 were $278.5 million, up 11.1 percent compared with $250.7 million in the third quarter of 2004. The sales gain was driven by continued strong comparable store sales and total square footage growth of 8.0 percent, as the Company ended the quarter with 2.56 million square feet. Continued strong comparable store sales, as well as the addition of five new stores, two relocated stores and two major remodels in the first nine months of 2005 helped drive the increase in net sales. Year-to-date 2005 net sales were $841.2 million, a 9.8 percent increase compared to $766.2 million in the same period last year.
Comparable store sales in the third quarter of 2005 increased 6.1 percent over the same period in 2004. Comparable store sales for the first nine months of 2005 increased 3.7 percent compared to the first nine months of 2004. During the second quarter of this year, the Company lapped the final quarter of difficult comparisons to a year ago when it benefited from the Southern California strike against the conventional grocery retailers. Excluding the strike-affected stores, comparable store sales were 8.8 percent and 7.9 percent during the third quarter and first nine months of 2005, respectively. The Company expects comparable store sales for the full year, for all stores, to be at the high end of its previous guidance range of 3.0 percent to 4.0 percent.
"Our sales have continued to gain momentum and accelerated in the third quarter," said Perry D. Odak, President and Chief Executive Officer of Wild Oats Markets, Inc. "With the new merchandising programs we introduced, continued growth in our Wild Oats branded products and improved operational execution, we expect to finish the year with strong top-line results. Additionally, we continue to improve our ability to strike a balance between sales, promotion and gross margin. And, as a result, we are raising our estimates for EPS and EBITDA for the year."
Net income for the third quarter of 2005 was $82,000, or $0.00 per diluted share, compared with a net loss of $7.1 million, or $0.25 per diluted share in the same period last year. The improvements relative to the prior year were due to stronger sales and a 150-basis-point improvement in gross margin. The net loss for the first nine months of 2005 was $148,000, or $0.01 per diluted share, compared with a net loss of $5.3 million, or $0.18 per diluted share, in the first nine months of 2004. As a result of progress to date in achieving profitability gains, Wild Oats Markets is increasing its guidance for its full-year 2005 EPS to be in the $0.04 to $0.07 per share range from previous guidance of $0.02 to $0.04 per share.
Net income in the third quarter of 2005 was negatively affected by several items totaling $0.3 million, or $0.01 per share. Included was $0.2 million related to Hurricane Katrina losses and $0.1 million in restructuring-related charges. Net income in the first nine months of 2005 was negatively impacted by several items totaling $4.4 million or $0.15 per share. Included was $3.0 million related to asset write-offs, restructuring charges and accelerated depreciation for the closure or relocation of facilities. Also included were $0.6 million related to the March 2005 lease restatement, $0.6 million related to the refinancing of the Company's credit facility, and the aforementioned Hurricane Katrina losses. Net income in the first nine months of 2004 was adversely affected by $7.0 million, or $0.15 per share, in restructuring-related charges, as well as costs to correct the Company's 401(k) retirement plan.
Adjusted EBITDA in the third quarter of 2005 was up significantly to $8.2 million compared to $1.0 million in the prior year third quarter (please refer to the attached reconciliation of non-GAAP Financial Information schedule). For the first nine months of 2005, the Company generated Adjusted EBITDA of $28.1 million, up 40.6 percent compared with $20.0 million in the same period last year. The Company is increasing its guidance for its full-year 2005 Adjusted EBITDA to be in the $37.5 million to $38.5 million range from that previously given of $36 million to $37 million.
Wild Oats reported gross profit of $80.7 million in the third quarter of 2005, a 17.3 percent increase compared with $68.8 million in the third quarter of 2004. As a percent of sales, gross profit improved by 150 basis points to 29.0 percent in the third quarter of 2005 compared with 27.5 percent in the third quarter last year. The strong improvement in gross margin is primarily due to the Company's ability to strike a balance between sales and promotional activity, and its implementation of new merchandising initiatives focused on improving margins. With these new initiatives, the Company anticipates gross margins to be close to 30.0 percent on a run-rate basis by the end of 2005. Wild Oats generated a 10.9 percent increase in gross profit to $243.6 million, or 29.0 percent of sales, in the first nine months of 2005 compared with $219.7 million, or 28.7 percent of sales, in the comparable period last year.
Direct store expenses in the third quarter of 2005 were $62.1 million, or 22.3 percent of sales, compared with $57.9 million, or 23.1 percent of sales, in the third quarter of 2004. This improvement in direct store expenses as a percent of sales is primarily due to leveraging payroll and the related taxes along with the stabilization of health care costs. In the first nine months of 2005, direct store expenses were $183.2 million, or 21.8 percent of sales, compared with $171.2 million, or 22.3 percent of sales, in the first nine months of 2004. The year-over-year improvement as a percent of sales is primarily attributable to leveraging payroll and self-insurance expenses relative to last year. For the full year, the Company expects direct store expenses as a percent of sales to be improved relative to 2004.
Higher sales, improved gross margins and better direct store expense leverage in the third quarter of 2005 resulted in a substantially higher store contribution of $18.7 million, a 70.6 percent increase, compared with $10.9 million in last year's third quarter. As a percent of sales, store contribution grew to 6.7 percent in the third quarter of this year, compared with 4.4 percent in the same period in 2004. Store contribution in the first nine months of 2005 was $60.4 million, or 7.2 percent of sales, a 24.6 percent increase, compared with $48.5 million, or 6.3 percent of sales, in the same period last year.
Selling, general and administrative (SG&A) expenses in the third quarter of 2005 were $16.6 million, or 6.0 percent of sales, compared to $15.5 million, or 6.2 percent of sales, in the prior year third quarter. SG&A as a percent of sales improved through leveraging sales, which offset accrued corporate and regional level bonus plan expenses. SG&A expenses in the first nine months of 2005 were $48.9 million, or 5.8 percent of sales, compared with $45.5 million, or 5.9 percent of sales in the same period last year. For the full year, the Company expects SG&A as a percent of sales to be slightly improved compared to 2004.
Since the beginning of the year, the sum of cash, cash equivalents and short-term investments increased by $9.6 million to $51.4 million. Capital expenditures were $19.2 million in the first nine months of 2005, compared to $41.5 million in the same period last year. The Company expects full-year capital expenditures to be in the $28.0 million to $32.0 million range.
Wild Oats Markets opened one new Henry's store in Glendale, Ariz. in the third quarter. Thus far in the fourth quarter, the Company has already opened its eighth and final store for 2005, a Henry's store in Rancho Cucamonga, Calif. Previously the Company had estimated it would open nine new stores in 2005; however, one Henry's store in the Phoenix market has been delayed into 2006. Currently Wild Oats has 16 leases or letters of intent signed for new stores opening in 2006 and 2007. The Company also completed the major remodeling of two older San Diego Henry's stores in July. Thus far in the fourth quarter, Wild Oats completed the major remodeling of stores in West Hartford, Conn. and Evanston, Ill., bringing its total number of major remodels for the year to four.
Company management will host a conference call and webcast with financial analysts and investors on Friday, November 4, 2005 at 8:00 a.m. Mountain time (10:00 a.m. Eastern time) to discuss financial results for the third quarter and first nine months ended October 1, 2005. Participants calling from the U.S. may call in by dialing (877) 252-5618. International callers should dial (706) 634-1349. Participants should ask for the "Wild Oats third quarter earnings conference call" or reference conference ID number 1514202 to be placed into the conference. A simultaneous webcast will be available through a link on the Investor Relations page of the Wild Oats website at www.wildoats.com. A replay of the conference call will be available until midnight on November 11, 2005 by dialing (800) 642-1687, domestically, or (706) 645-9291 from outside the U.S. and referencing the conference ID number listed above. The conference call will also be archived on the Company's website.
Use of Non-GAAP Financial Measures
Wild Oats believes the attached supplemental presentation of EBITDA and Adjusted EBITDA calculations provide meaningful non-GAAP financial measures to help management and investors understand and compare business trends among different reporting periods on a consistent basis, independently of regularly reported non-cash charges and infrequent or unusual events as determined by management. Readers are cautioned not to view EBITDA or Adjusted EBITDA as an alternative to GAAP results or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP net income (loss) results to EBITDA and Adjusted EBITDA for the third quarters and first nine months of 2005 and 2004, respectively, contained below.
About Wild Oats
Wild Oats Markets, Inc. is a nationwide chain of natural and organic foods markets in the U.S. and Canada. With more than $1 billion in annual sales, the Company currently operates 113 natural foods stores in 24 states and British Columbia, Canada. The Company's markets include: Wild Oats Natural Marketplace, Henry's Farmers Markets, Sun Harvest and Capers Community Markets. For more information, please visit the Company's website at www.wildoats.com.
Risk Factors and Uncertainties
This release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Such forward-looking statements include: the number of stores the Company plans to open, remodel and relocate in the future, and the anticipated performance of such new stores; the impact of changes in the Company's merchandising and marketing programs; expected future comparable store sales, revenues and earnings per share, and future financial measures and prospects for favorable growth and performance.
The statements made by the Company are based on management's present expectations, and actual results may differ from the results indicated or otherwise implied by such forward-looking statements due to certain risks and uncertainties including, but not limited to: the number of stores opened, closed, remodeled or relocated; the Company's ability to execute, and the results of merchandising and marketing programs; the impact of competition and other factors as are set forth in the Company's SEC filings, including the Annual Report on Form 10-K, as amended, for the fiscal year ended January 1, 2005 and the Company's quarterly reports on Form 10-Q. These risk factors may not be an all-inclusive enumeration of the business risks faced by Wild Oats. Investors should recognize that the reliability of any projected financial data diminishes the farther in the future the data is projected.
The statements made by management of the Company and summarized above represent their views as of the date of this press release, and it should not be assumed that the statements made herein remain accurate as of any future date. Wild Oats does not intend to update these statements and undertakes no duty to any person to effect any such update under any circumstances.