US natural and organic foods retailer Wild Oats Markets has reported a sharp drop in quarterly net income and said it had implemented a corporate reorganisation that had resulted in the elimination of several senior-level positions.

The company said net income was US$363,000, or 1 cent per share, for the second quarter to 26 June, compared with $2.2m, or 7 cents per share, in the same period last year, as a result of pressure on margins, increased direct store expenses and softer-than-expected sales in the quarter.

Sales increased 3.9% to $251.7m, while comparable store sales rose 1.5%. The company said second quarter sales in Southern California had been adversely affected by aggressive promotional activity by conventional grocers as they tried to boost their sales following a four-month long strike.

“While we are disappointed with our results in the quarter, we believe that the issues affecting our business are short-term. We are confident that the steps we are taking to restructure our operations and to drive growth in our business will produce improved results over time,” said Perry D. Odak, president and chief executive officer of Wild Oats Markets.

Wild Oats Markets said that based on the operating results to date, it has revised its full-year 2004 EPS guidance to be in the range of 20 to 24 cents per diluted share.

The company also announced a corporate reorganisation that it said is designed to streamline operations and achieve the benefits of centralised purchasing, merchandising and pricing. Wild Oats said the reorganisation had resulted in the elimination of several senior-level positions including the position held by David Clark, general manager of Wild Oats stores. Ed Dunlap, the company’s CFO, has been promoted to senior vice president of operations for the entire company and will continue to serve in a dual role until a new chief financial officer is hired.