Boulder, Colo.-based Wild Oats Markets, chain of natural and organic foods stores across the US and Canada, has posted net income of US$1.5m (US$0.06 /share) for its Q2 ended 29 June, on sales of US$236.2m.
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This compares to a net loss of (US$38.1m) ((US$1.55)/diluted share) on sales of US$229.4m in the Q2 2001.
The 3% sales growth was was driven by 5.2% comparable store sales growth in the Q2, compared with 3.9% in last year’s Q2. There was also continued positive customer response to the company’s marketing and merchandising programmes, initiatives now expanded to additional stores in Arizona, Arkansas, Illinois, New Mexico, Ohio, Tennessee and Utah.
Strong comparable store sales of 6.2% in the Q1 2002 contributed to a 4.5% increase in net sales to US$469.2m, compared to US$448.9m year on year. This increase was achieved despite the sale or closure of eight under-performing stores from the company’s sales base at the end of the Q4 2001 and in the H1 2002. In addition, the company closed one Henry’s Marketplace store in July 2002 when its lease expired.
Net income for the H1 2002 was US$2.2m (US$0.09/diluted share), compared with net loss of (US$38.2m) ((US$1.58)/diluted share), in the H1 2001. The 2002 figures include total additional restructuring and asset impairment charges of about US$1.3m and reversals of previous restructuring and asset impairment charges of US$2m. In the H1 2001, the company recorded such charges of about US$54.8m, as well as US$5.9m in one-time charges and goodwill expense of US$1.5m.
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By GlobalData“Despite a challenging economy and business environment for many industries, we believe our financial performance in the Q2 and H1 2002 is evidence that our company-wide initiatives are working,” said Perry D. Odak, oresident and CEO: “We expect our turnaround plan to continue to drive bottom line momentum as we are able to leverage our sales increases into profitable growth. We continue to focus on operational efficiencies in our stores, which has allowed us to improve service to our customers, further reduce inventory levels, and generate cash to pay down debt and fund our growth initiatives.”
“Our gross margins have returned to levels that were achieved prior to the implementation of our marketing and merchandising programs, which we started in the Q3 2001, and we will continue to focus on initiatives to further improve our margins as we drive sales going forward,” said Odak.
Continued store-level operational improvements led to a 6.3% reduction in direct store expenses in the Q2, which helped to strengthen profitability. The store contribution margin also improved significantly in the Q2 2002 and was 8.4% of sales, a 3.4 percentage point increase compared with 5% in the Q2 last year.
Selling, general and administrative (SG&A) expenses in the Q2 2002 increased 16.7% to US$14.8m year on year. SG&A as a percent of sales was 6.2% in the Q2 2002 compared with 5.5% in the Q2 2001.
During the H1 2002, net cash provided by operating activities was US$23.8m. Capital expenditures were US$1.9m for the Q2, compared to US$3.7m in the Q2 2001. In the Q2, Wild Oats paid down a net US$10.5m on its credit facility and, as of the end of the quarter, had about US$96.3m outstanding on its US$125m credit facility.
2002 outlook
Expansion of the company’s marketing and merchandising initiatives late in the Q2 and early in the Q3 2002, coupled with other initiatives planned in the H2, are expected to increase comparable store sales between 5.5% and 7% for the remainder of the year. No new store openings are anticipated until early 2003.
Continued improvement in gross margins, in conjunction with an expected reduction in direct store expenses and SG&A expenses as a percent of sales, is expected to translate into net earnings per diluted share of US$0.08, and US$0.10 to US$0.11 in the Q3 and Q4, respectively. Combined with net income of US$2.2m, (US$0.09/diluted share), for the H1 2002, projected net earnings for the FY 2002 is expected to reach US$0.27 to US$0.28 per diluted share.
