Healthy Results for Whole Foods - Analyst Blog

Whole Foods Market Inc. (WFMI), the natural and organic grocer, recently reported its fourth quarter results. Earnings of 19 cents a share beat the Zacks Consensus Estimate by a penny, surging 18.8% from 16 cents posted in the prior-year quarter. On a reported basis, including unusual items, earnings came in at 20 cents a share, far ahead of 1 cent delivered in the year-ago quarter.

The stringent cost-control measures, effective inventory management, improved store-level performance and increase in lower-priced brands drove earnings growth. Whole Foods sees earnings of $1.05 to $1.10 per share for fiscal year 2010, just below the Zacks Consensus Estimate of $1.11. 

Whole Foods sustained its growth momentum in the top line for the second consecutive quarter. After rising 2% year on year in the third-quarter, revenues climbed 2.3% to $1,829.2 million in the fourth quarter, showing signs of revival. Earlier, the company saw a 0.4% rise in first-quarter revenues while second-quarter revenues decreased 0.5%. So far, in the first five weeks of first-quarter 2010, total sales climbed 5%.

Comparable-store sales slipped but at a decelerating rate – 0.9% fall in the reported quarter – as it improved sequentially over declines of 2.5% in the third-quarter 2009, 4.8% in the second quarter and 4% in the first quarter. Comps in the first five weeks of first-quarter 2010 jumped 1.6%.

Identical-store sales also fell 2.3% in the quarter, compared to a decline of 0.5% in the prior-year quarter but improved sequentially over declines of 3.8% in the third-quarter, 5.8% in the second quarter, and 4.9% in the first quarter. So far, in the first five weeks of first-quarter 2010, identical-store sales rose 0.4%. The uptrend in comparable and identical-store sales was due to improved transaction counts.

Whole Foods expects the growth momentum generated in sales in the fiscal 2009 to continue through fiscal 2010. Management anticipates an increase of 5% to 8% in total sales, driven by 1% to 4% rise in comparable-store sales and flat to 3% growth in identical-store sales.

Adjusted EBITDA rose 46% to $133.5 million. Management expects EBITDA in the range of $625 million to $650 million. Whole Foods Market is engaged in the operation of natural and organic foods supermarkets primarily in the United States, competing with Kroger Co. (KR) and Safeway Inc. (SWY). The company currently operates 286 stores and expects to open 53 stores in the next four years.