Monday, February 7, 2011

Whole Foods Market Inc. (NASDAQ: WFMI): Q1 Earnings Preview

Whole Foods Market Inc. (NASDAQ: WFMI) is scheduled to release its fiscal first-quarter earnings after the closing bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 45 cents per share on revenue of $2.98 billion. In the year ago period, the company reported earnings of 32 cents per share on revenue of $2.64 billion.

Whole Foods Market Inc. engages in the ownership and operation of natural and organic foods supermarkets primarily in the United States. The company has more than 300 stores in the United States, Canada and the United Kingdom.

In the preceding fourth quarter, the Austin, Texas-based company's net income was $57.5 million, or 33 cents per share, from $28.6 million, or 20 cents per share, in the prior-year quarter. Revenue grew 15% to $2.1 billion from $1.8 billion. Analysts, on average, expected the company to report earnings of 24 cents per share on revenue of $7.42 billion.

At its last earnings call in November, the company lifted its earnings outlook for fiscal year 2011 to $1.66 to $1.71, or 16% to 20% growth year over year. Previously, the company anticipated fiscal 2011 earnings in the range of $1.59 to $1.64 per share. The company also said that it now expects sales growth of 10% to 12% for fiscal 2011 compared to the prior outlook of 10% to 13%.  The company has also raised its operating margin guidance for the forthcoming fiscal year to 5.0%

Whole Foods' business suffered when the recession crimped spending, and decadence fell out of fashion. The company made a number of major changes -- increasing lower-priced offerings, slowing growth and cutting its debt. It also began to slowly shift its focus back toward health, while maintaining its foodie fan base.

The company has also benefited from growth in the natural and organic category and low unemployment for its core customers, who are typically more affluent and well-educated. Whole Foods has been spurring its revenues through new store openings, acquisitions and comparable-store sales growth. Given the food retailing industry is highly fragmented, the company has been able to maintain a track record of successful integration of its regional acquisitions. The stringent cost-control measures, effective inventory management, and improved store-level performance are driving earnings growth. Whole Foods also has been revamping its pricing strategy and concentrating more on value offerings, while maintaining healthy margins.

Whole Foods has been prudent in opening new stores with 15 stores in fiscal 2009 and 16 in 2010. However, Whole Foods hinted that it wants to accelerate its pace in the coming years with plans of opening 17 stores in fiscal 2011 and 20 in fiscal 2012 with a moderate opening of 14 more stores in 2013.

This year Whole Foods is rolling out a new range of healthier prepared foods, nutritional scorecards and other changes as part of its resolution to lure shoppers who want to get healthy.

In December, the company said that it will reinstate its quarterly dividend of 10-cents-a-share. Whole Foods' last quarterly dividend was 20 cents a share in July 2008.

Full Disclosure: None.
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