Whole Foods Market, Inc. Announces Record Second Quarter Results; 26% EPS Increase on 21% Sales Growth; Identical Store Sales Increase 9%

AUSTIN, Texas, May 8 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc. (Nasdaq: WFMI) today reported record sales and earnings for the second fiscal quarter (twelve weeks) ended April 14, 2002. Sales for the quarter increased 21% over the prior year driven by 17% square footage growth and better than expected comparable store sales growth of 10.1%. Sales in identical stores (excluding three relocated stores) increased 9.1% for the quarter. Income from continuing operations for the quarter increased 36% to $20.2 million from $14.9 million in the prior year, and diluted earnings per share increased 26% to $0.34, compared to $0.27 in the prior year.

For the twenty-eight week period ended April 14, 2002, sales increased 21%, with sales in comparable stores increasing 9.8% and sales in identical stores increasing 8.2%. Income from continuing operations increased 35% to $40.4 million, or $0.68 per share, compared to $30.0 million, or $0.54 per share in the prior year.

"We are delighted to report our tenth consecutive quarter of 20% plus sales growth," said John Mackey, Chairman, President and Chief Executive Officer of Whole Foods Market. "We are translating our strong sales growth into sound bottom line results with record store contribution profit of over 10% of sales and a 26% increase in earnings per share."

For all stores, store contribution increased 56 basis points to a record 10.3% of sales, gross profit increased 8 basis points to 35.0% of sales, and direct store expenses improved 48 basis points to 24.8% of sales. For stores in the comparable store base, store contribution increased 59 basis points to 11.0% of sales, gross profit improved 12 basis points to 35.7% of sales and direct store expenses improved 47 basis points to 24.7% of sales.

General and administrative expenses as a percentage of sales were essentially flat over the prior year, primarily due to lower amortization expense during the quarter. Depreciation and amortization totaled $19 million in the quarter, and EBITDA was $54.7 million or 8.8% of sales.

The Company's stated goal is to build long term intrinsic value measured by improvement in EVA. For the quarter, EVA improved $3.1 million over the prior year from negative $4.1 million to negative $1.0 million. Stores produced EVA of $25 million, a 30% increase over the prior year. NOPAT increased 27% to $23 million, and total capital increased 8% to $1 billion. These calculations reflect a 40% tax rate and 10% weighted average cost of capital in both years.

Capital expenditures were $35 million for the quarter of which $25 million was for new store development. The Company's credit line balance was $61 million at the end of the second quarter, a decrease of $26 million from the prior quarter. The Company had approximately $231 million in total long- term debt as of the end of the quarter and its debt to equity ratio decreased to .47 to 1 versus .92 to 1 in the prior year. Subsequent to the end of the quarter the Company paid down its credit facility by an additional $16 million leaving approximately $171 million available on the line of credit and lowering its total outstanding long-term debt to $215 million.

Pre-opening costs are expensed as incurred and totaled approximately $2.2 million during the quarter of which approximately $1.6 million was related to the three stores opened during the quarter. The remainder was for stores in development of which three stores have opened or are scheduled to open within the first 30 days of the third quarter. Relocation expense was approximately $3.2 million of which $1.7 million was primarily related to the relocation of two non-retail facilities and an estimated $1.5 million was for the write-off associated with a recent decision to relocate a store in the Dallas market.

Last week the Company opened two stores in Toronto, Canada and in Providence, RI. The Toronto store is the Company's first location outside of the United States. The Company has also closed one store as previously announced and expects to open two additional stores during the third quarter.

The Company has signed leases for new stores in Palm Beach, FL; Austin, TX; Atlanta, GA; Long Island, NY and for a significant expansion of its Plano, TX store to double its size from 31,000 to 62,000 square feet. The Austin store will be the largest store currently in development at 80,000 square feet. The Company currently has 21 stores in development, including the Plano remodel, with an average store size of 37,000 square feet.

Approximately 20% of these stores will be in new markets. The Company also recently announced the signing of a long-term lease for a new 170,000 square foot office building to be developed in conjunction with its new store in Austin. The ground breaking for the store and office building is scheduled to take place later this year with an estimated completion date in early 2005. The offices will accommodate the Company's future infrastructure needs required to meet its aggressive growth goal of more than tripling its store base to 400 stores by the year 2010.

Forward-Looking Guidance:
The Company is raising its sales growth guidance for the fiscal year to 17% to 22% from 15% to 20%, adjusted for the 53 weeks in fiscal year 2001. Comparable store sales guidance is 7% to 8% for the third quarter and 6% to 8% for the fourth quarter due to tougher comparisons of over 10% year-over-year in the third and fourth quarters. The Company has opened two stores, closed one store, and plans to open two additional stores during the third quarter. The Company now expects to open two to four new stores in the fourth quarter.

The Company expects gross profit margin to be lower for the fiscal year due to the recently acquired Harry's stores, which are expected to negatively impact gross margins in the range of 20 to 30 basis points, and to allow the Company to maintain pricing flexibility. The Company expects the degree of impact from the acquired stores to lessen as the integration of those stores progresses.

The Company is focused on producing operating margin improvement primarily through the leveraging of direct store expenses; however, the higher operating expenses of new stores will continue to have a partially offsetting impact. General and administrative expenses as a percentage of sales are expected to increase slightly compared to the prior year due to the additional infrastructure for the new South Region headquartered in Atlanta, GA, as well as an increased marketing investment related to the Company's national branding initiative. Pre-opening and relocation expense is now expected to be in the range of $12 million to $14 million for the year, including the $1.5 million in relocation expense which had not been previously forecast.

Capital expenditures are now expected to be in the range of $160 million to $180 million for the year, excluding any cash acquisitions. The Company does not expect any significant borrowings for the remainder of the year and is lowering its net interest expense guidance by $1 million to a range of $9 million to $10 million for the year. The Company still expects diluted earnings per share for the fiscal year in the range of $1.30 to $1.36. For fiscal year 2003, the Company expects diluted earnings per share in the range of $1.56 - $1.63.

About Whole Foods Market:
Founded in 1980 in Austin, Texas, Whole Foods Market(R) (www.wholefoodsmarket.com ) is the largest natural and organic foods supermarket retailer. In fiscal year 2001, the company had sales of $2.3 billion and currently has 132 stores in the U.S. and Canada. The Whole Foods Market motto, "Whole Foods, Whole People, Whole Planet"(TM) captures the company's mission to find success in customer satisfaction and wellness, employee excellence and happiness, enhanced shareholder value, community support, and environmental improvement. Whole Foods Market, Fresh Fields(R), Bread & Circus(R), Wellspring Grocery(R) and Harry's Farmer's Market(R) are all registered trademarks owned by Whole Foods Market. The company employs more than 23,000 team members and has been ranked for five consecutive years as one of the "Top 100 Companies to Work for" in America by Fortune magazine.

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, including but not limited to general business conditions, the timely development and opening of new stores, the integration of acquired stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the report on Form 10K for the fiscal year ended September 30, 2001. The Company does not undertake any obligation to update forward-looking statements.

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