Austin American-Statesman
Whole Foods Market Inc. ended what company executives describe as its most difficult year with another quarterly profit, but the natural foods grocer saw its stock drop after it forecast lower-than-expected earnings for the coming fiscal year.
The company on Wednesday reported net income of $36.4 million on sales of $1.83 billion in its fiscal fourth quarter, which ended Sept. 27, with $28.7 million after deducting dividends on preferred shares. In the same quarter a year ago, profit, reduced by several one-time items, was $1.5 million on sales of $1.79 billion.
Whole Foods made 20 cents a share in its most recent quarter, beating analyst expectations of 18 cents per share.
"We believe our sales have stabilized and officially turned the corner," CEO John Mackey said in a conference call with analysts.
But citing the down economy, Whole Foods executives forecast sales growth of 5 to 8 percent for the company's fiscal year 2010, including growth in same-store sales — sales made at stores open at least a year — of 1 to 4 percent. The company projected earnings of $1.05 to $1.10 per share, below analyst expectations of $1.11 per share.
In addition to the recession, company executives said Whole Foods' continued value push, which includes cutting prices and offering bundle deals to customers, could also affect sales. Whole Foods stock dropped by 7.7 percent, to $29.50, in after-hours trading Wednesday.
JPMorgan Chase & Co. analyst Charles Grom said he thought the company was "appropriately conservative" in its forecast.
"They're not out of the woods, so it makes sense to be conservative," he said.
Hurt by a decline in consumer spending, Whole Foods had been in a slump for several quarters. In its most recent quarter, same-store sales dropped by 0.9 percent from the year-ago quarter, but that was an improvement from a 2.5 percent drop in its fiscal third quarter and a 4.8 percent drop in its second quarter.
The company also discussed the decision by Los Angeles private equity firm Leonard Green & Partners LP to convert its 425,000 shares of preferred stock to common stock, making the firm Whole Foods' biggest shareholder by far, with more than 17 percent of the company.
Last November, the firm acquired the stock with a $425 million investment in Whole Foods, providing a cash infusion at a time when the grocer was struggling amid the recession. The agreement included a provision that allowed Whole Foods to trade the shares for common stock under certain circumstances.
The conversion will save Whole Foods about $34 million in preferred cash dividends per year, the company said. The company paid $7.7 million in preferred dividends in its most recent quarter and $28 million in its fiscal year 2009.
Although Whole Foods will have to issue 29.7 million new shares in the transaction, the company said that should not have a material impact on future earnings per share.
There was no mention during Wednesday's earnings call of a boycott movement that started last quarter after a controversial op-ed column written by Mackey appeared in The Wall Street Journal. Although some shoppers, angered by Mackey's opposition to President Barack Obama's health care plan, vowed to stay away from Whole Foods, the company found support from conservative groups who urged "buycotts" in support of Mackey.
Mackey alluded to the controversy when asked in the conference call about the recent sales rebound.
"Could be a bunch of buycotters," he said. "You never know."
The company on Wednesday reported net income of $36.4 million on sales of $1.83 billion in its fiscal fourth quarter, which ended Sept. 27, with $28.7 million after deducting dividends on preferred shares. In the same quarter a year ago, profit, reduced by several one-time items, was $1.5 million on sales of $1.79 billion.
Whole Foods made 20 cents a share in its most recent quarter, beating analyst expectations of 18 cents per share.
"We believe our sales have stabilized and officially turned the corner," CEO John Mackey said in a conference call with analysts.
But citing the down economy, Whole Foods executives forecast sales growth of 5 to 8 percent for the company's fiscal year 2010, including growth in same-store sales — sales made at stores open at least a year — of 1 to 4 percent. The company projected earnings of $1.05 to $1.10 per share, below analyst expectations of $1.11 per share.
In addition to the recession, company executives said Whole Foods' continued value push, which includes cutting prices and offering bundle deals to customers, could also affect sales. Whole Foods stock dropped by 7.7 percent, to $29.50, in after-hours trading Wednesday.
JPMorgan Chase & Co. analyst Charles Grom said he thought the company was "appropriately conservative" in its forecast.
"They're not out of the woods, so it makes sense to be conservative," he said.
Hurt by a decline in consumer spending, Whole Foods had been in a slump for several quarters. In its most recent quarter, same-store sales dropped by 0.9 percent from the year-ago quarter, but that was an improvement from a 2.5 percent drop in its fiscal third quarter and a 4.8 percent drop in its second quarter.
The company also discussed the decision by Los Angeles private equity firm Leonard Green & Partners LP to convert its 425,000 shares of preferred stock to common stock, making the firm Whole Foods' biggest shareholder by far, with more than 17 percent of the company.
Last November, the firm acquired the stock with a $425 million investment in Whole Foods, providing a cash infusion at a time when the grocer was struggling amid the recession. The agreement included a provision that allowed Whole Foods to trade the shares for common stock under certain circumstances.
The conversion will save Whole Foods about $34 million in preferred cash dividends per year, the company said. The company paid $7.7 million in preferred dividends in its most recent quarter and $28 million in its fiscal year 2009.
Although Whole Foods will have to issue 29.7 million new shares in the transaction, the company said that should not have a material impact on future earnings per share.
There was no mention during Wednesday's earnings call of a boycott movement that started last quarter after a controversial op-ed column written by Mackey appeared in The Wall Street Journal. Although some shoppers, angered by Mackey's opposition to President Barack Obama's health care plan, vowed to stay away from Whole Foods, the company found support from conservative groups who urged "buycotts" in support of Mackey.
Mackey alluded to the controversy when asked in the conference call about the recent sales rebound.
"Could be a bunch of buycotters," he said. "You never know."
