Whole Foods 1Q net income up 79 percent

By SARAH SKIDMORE
The Associated Press
Wednesday, February 9, 2011; 7:00 PM

PORTLAND, Ore. -- Whole Foods Market Inc.'s comeback continued in the first quarter as stronger sales drove its net income up 79 percent.

The natural and organic grocery chain raised its full-year guidance, and its shares soared in after-market trading.

Whole Foods, based in Austin, Texas, reported Wednesday that it earned $88.7 million, or 51 cents per share, for the 16 weeks that ended Jan. 16. That's up from $49.7 million, or 32 cents per share, in the same period last year. Revenue rose 14 percent to $3 billion.

The results beat analysts' average forecast for earnings of 46 cents per share on revenue of $2.95 billion, according to FactSet.

Whole Foods has moved from one of the grocers hit hardest by the recession to one of the industry's top performers. It cut costs, slowed growth, paid down debt, added more low-priced items and retooled its stores to make them more appealing to shoppers.

As a result, its customer traffic, sales and profitability have grown consistently for more than a year.

The company also recently reinstated its quarterly cash dividend, and its share price has roughly doubled in the past year.

Whole Foods co-CEO Walter Robb said the company has matured financial and is evolving as a retailer.


The biggest driver in its success is the increased traffic in its stores, which he says is a mix of existing and new customers.

Revenue at Whole Foods stores open at least a year increased 9.1 percent for the quarter - the comparison's biggest gain in four years. This comparison is a key indicator of a retailer's financial performance because it excludes stores that opened or closed during the year.

Whole Foods said it sees consumer confidence increasing in not just the number of shoppers but the amount they are spending each trip.

"We believe our value efforts and differentiation are continuing to gain traction," Robb said.

Whole Foods also said its average price per item rose only slightly during the quarter as it was selective about where it passed along cost increases in food products to consumers.

The food industry is facing tougher times as the costs of wheat, coffee, sugar and other goods increase. A number of food makers, restaurants and grocers have raised prices or plan to do so to offset these costs.

Whole Foods said has slightly more protection from the fluctuations in commodity markets because of its emphasis on organic foods, which trade under different contract conditions from traditional commodities. But the grocer said it may feel more pressure during the second half of the year.

The company remained optimistic, however, raising its forecast for the year based on the strong sales trends and signs of growing consumer confidence. It now expects to earn $1.76 to $1.80 per share, up from its earlier guidance of $1.66 to $1.71 per share.

Shares of Whole Foods jumped $4.50, or 8.4 percent, to $58.25 after hours. The company's shares have traded between $24.94 and $53.84 in the past 52 weeks.

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