• Comparable Store Sales Increased 9.6%
  • As Expected, Higher Utility Costs Impact Earnings by $0.03

Whole Foods Market, Inc. (Nasdaq: WFMI) yesterday reported sales and earnings for the second quarter ended April 8, 2001. Results from operations for the twelve week and twenty-eight week periods are as follows (in millions except percentages and per share data):

                                             %                          %
2Q01 2Q00* Change FY01 FY00* Change

Sales $516.7 $425.1 22% $1,160.1 $957.0 21%
Utilities expense 8.2 5.5 50% 17.5 12.4 42%
Gross profit 180.5 147.5 22% 401.0 327.2 23%
Pro forma
income from
operations 29.2 25.2 16% 59.5 50.6 18%
Pro forma
net income 14.9 13.3 12% 30.0 26.8 12%
Pro forma
diluted EPS $0.54 $ 0.49 10% $1.08 $.99 9%

* Prior year net income and diluted EPS have been adjusted to reflect a
39.5% tax rate for the entire 2000 fiscal year and exclude the
operating results of Wholefoods.com in the first quarter of fiscal
year 2000.


Sales for the quarter increased 22% over the prior year, slightly above the Company’s 15-20% guidance. This increase was driven by year-over-year square footage growth of 18% and stronger than expected comparable store sales growth of 9.6%. Sales in identical stores increased 8.2% for the quarter. Year-to-date sales increased 21%, with sales in comparable stores increasing 8.5% and sales in identical stores increasing 7.2%.

“Despite worries about a slowing economy, we have yet to see any softening in our sales. Our comps continue to be among the highest in retailing, running at over 9%, which is above our 8% historical average,” said John Mackey, Chairman and Chief Executive Officer of Whole Foods Market. “Even in California, which has been hit hard by a slowing tech economy and high utility costs, our comps are running over 10%.”

Store contribution for all stores was 9.7% of sales for the quarter. Excluding new and acquired stores, store contribution was 10.3% of sales. Gross margins increased 23 basis points over the prior year to 34.9% of sales despite a 30 basis point increase in utility costs, which are included in occupancy costs. The impact from the higher utility expense was within the range expected by the Company and impacted earnings per share by approximately $0.03 for the quarter.

Direct store expenses were up 39 basis points over the same quarter of last year due entirely to the impact of new and acquired stores. Existing stores saw a 5 basis point decrease in direct store expenses. General and administrative expenses were up 30 basis points over the prior year due to increased wage costs and depreciation from investments in information systems.

The Company’s stated goal is to build long term intrinsic value measured by improvement in EVA. The Company generated negative EVA of approximately $6.9 million during the quarter. Although the Company’s stores produce very strong EVA on average, the Company currently has negative EVA due to the capital charge on approximately $300 million of unrecorded implied goodwill related to previous pooling acquisitions. For the second quarter, the change in EVA was relatively flat over the prior year declining approximately $650,000. Net Operating Profit After Tax (NOPAT) increased 15% to $17 million, and total capital increased 11% to $968 million. Depreciation and amortization was $18 million in the quarter, and EBITDA increased 20% to $46.9 million or 9.1% of sales.

“Our store model has historically produced very strong returns on invested capital with our stores over five years of age producing 57% returns in the second quarter,” said John Mackey. “Based on results we have seen so far, we expect our newer, larger stores to produce even greater results over time.”

                             Average        Average        NOPAT       % of
Size Comps ROIC Store Base

Stores over five
years of age 22,900 4.9% 57% 46%
Stores between two
and five years of age 30,600 11.4% 34% 29%
Stores between one
and two years of age 34,000 21.3% 13% 25%

All stores in comp base
(5.9 years of age) 27,100 9.6% 34% 100%


During the second quarter, the Company relocated one store in Walnut Creek, CA, and opened two new stores in New York City and Philadelphia. Of the new stores opened so far this year, three stores are already in the Company’s top 10 highest average weekly volume stores: Cherry Creek in Denver, P Street in Washington, D.C., and Chelsea in New York City. So far in the third quarter, the Company has opened one new store in Boca Raton, FL. The Company is pleased to announce it has signed leases for two new stores in New Orleans, LA, and Framingham, MA, and now has 21 stores in development with an average store size of 35,000 square feet.

Capital expenditures were $37 million for the quarter, $92 million year to date, and are expected to be at the low end of the Company’s $180-190 million guidance range for the fiscal year. The Company recently negotiated an extended and expanded $220 million credit facility and, as of the end of the quarter, had $333 million in total long-term debt with $162 million outstanding on the line of credit. Subsequent to the end of the quarter, the Company paid down its credit line by $5 million and currently has $59 million available. The Company does not anticipate any significant borrowings on its credit facility for the remainder of the year, absent any potential future cash acquisitions.

For the second half of the year, the Company expects to see top line growth of 15-20% driven by a 17% increase in square footage year-over-year and comparable store sales of 6-8% for the third quarter and 5-7% for the fourth quarter. Comps in the third quarter are currently running above the 6-8% range; however, given the uncertain economic outlook, the Company prefers to remain conservative in its guidance.

At the time of the Company’s first quarter earnings announcement, the Company expected to see utility cost increases in the range of 20-40 basis points for the remainder of the year. Due to the likelihood of further rate hikes in California, the Company has updated its guidance for the remainder of the year to a 30-50 basis point increase in utility costs over the prior year. This 10 basis point increase is expected to be offset by lower net interest expense due to lower estimated borrowings as well a lower interest rate on its credit facility; therefore, the Company is maintaining its EPS guidance range for the year of $2.15-$2.20. For fiscal year 2002, the Company expects sales growth to remain in the 15-20% range based on 15-20 new and acquired stores and comps of 5-7%.

Whole Foods Market, a Fortune 1000 company, opened its first store in Austin, Texas, in 1980. Since then, Whole Foods has grown to operate the country’s largest chain of natural foods supermarkets with 122 stores in 22 states plus the District of Columbia. The Company invites you to learn more about Whole Foods Market at www.wholefoodsmarket.com.

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 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 24, 2000. The Company does not undertake any obligation to update forward-looking statements.

     Whole Foods Market, Inc. And Subsidiaries
Condensed Consolidated Income Statements
(Unaudited) In thousands, except per share data

Twelve weeks Twenty-eight weeks
ended ended
April 8 April 9 April 8 April 9
2001 2000 2001 2000

Sales $516,660 425,113 1,160,095 957,739
Cost of goods sold
and occupancy costs 336,139 277,571 759,056 630,605
Gross profit 180,521 147,542 401,039 327,134
Selling, general and
administrative expenses 147,758 118,614 333,548 269,253
Amortization expense 1,593 1,284 3,342 2,849
Pre-opening and
relocation costs 2,012 2,440 4,659 6,070
Operating income 29,158 25,204 59,490 48,962
Interest expense, net (4,083) (3,241) (9,341) (6,258)
Income from continuing
operations before income
taxes and cumulative
effect of change in
accounting principle 25,075 21,963 50,149 42,704
Provision for income taxes 10,030 9,224 20,060 17,915
Equity in losses in
unconsolidated affiliate 126 — 126 —
Income from continuing
operations before
cumulative effect of
change in accounting
principle 14,919 12,739 29,963 24,789
Cumulative effect of change
in accounting principle,
net of income taxes — — — (375)

Income from continuing
operations $14,919 12,739 29,963 24,414

Basic earnings per share:
Income from continuing
operations before
cumulative effect of
change in accounting
principle $0.56 0.49 1.12 0.95
Cumulative effect of
change in accounting
principle, net of
income taxes — — — (0.01)
Income from continuing
operations $0.56 0.49 1.12 0.94
Weighted average
shares outstanding 26,743 26,024 26,640 26,027

Diluted earnings per share:
Income from continuing
operations before
cumulative effect of
change in accounting
principle $0.54 0.47 1.08 0.92
Cumulative effect of
change in accounting
principle, net of
income taxes — — — (0.01)
Income from continuing
operations $0.54 0.47 1.08 0.90
Weighted average shares
outstanding, diluted
basis 27,766 27,076 27,814 27,000

Selected Financial Information
(In thousands) 2nd Qtr 2nd Qtr YTD YTD
2001 2000 2001 2000

Cash and marketable securities 1,948 1,731
Merchandise inventory 101,409 85,920
Total current assets 168,340 129,444
Total assets 835,217 745,513
Total current liabilities 152,281 137,147
Long-term debt (including current
maturities) 332,923 276,440
Total shareholders’ equity 345,192 324,879
Core retail – Depreciation and
amortization 17,749 13,800 39,545 31,724
Core retail – Capital expenditures 37,160 33,958 91,880 78,887

Note: Income statements and selected financial information above
exclude revisions to estimates associated with discontinued
operations.

Contact: Cindy Emrick, VP of Investor Relations
512.477.4455