BOULDER, Colo. -- Wild Oats Community Markets here said sales and earnings for the third quarter jumped 21% and 27%, respectively, from a year ago, and that sales figures could have been higher if there had not been a delay in opening two new stores.
In a conference call with securities analysts, Mary Beth Lewis, the company's chief financial officer, said "sales declined slightly" from the previous quarter because of the delayed openings -- in Santa Monica, Calif., and South Beach, Fla., near Miami. She said the company also had an expected slight drop in sales "due to seasonality," and estimated the total loss of revenue at $3 million.
After the conference call, Lewis told SN the delays were caused by municipal "permitting issues" in both locations, but that a six-month delay in Santa Monica "was the one that was most expensive."
"We run into that now and then," Lewis said. Exacerbating the problem, she added, was the fact that "all that time, the meter is running; you're paying utilities" and other costs. Both stores opened late in the third quarter, Lewis said.
Still, the company reported third-quarter sales of $96.8 million for the period ended Sept. 26 and $287.1 million for the year to date. In addition to the aforementioned store openings, Wild Oats, the second-largest natural foods supermarket chain in North America, is getting ready to launch units in Denver and Dallas this month and in Las Vegas, Minneapolis and Memphis, Tenn., in December. The company plans to open another 11 stores in 10 states in 1999 and relocate four others.
The company's earnings for the third quarter increased 64% to $3 million, compared with $1.8 million a year ago, Lewis said. Excluding nonrecurring, acquisition-related expenses, net income for the nine months jumped 74% to $8.8 million; the year-ago figure was $5.1 million. Comparable store sales rose 4% for the quarter and 4% for the year to date, Lewis said.
Mike Gilliland, chief executive officer, said in the conference call that the new stores would average 25,000 square feet and feature "greatly expanded perishable offerings." He said the company expects "to grow our top line by 30 percent a year." The new stores, he said, are projected to produce $7.5 million in revenue out of the gate.
"We expect the new stores to break even rather than lose money," Gilliland said.
He said these expectations are based in part on returns on improvements the company made, including "better store design, better operational execution, higher levels of service and better merchandising."
The company also discussed the early 1999 introduction of a new line of private-label groceries: Down to Earth. In a prior interview with SN, Jim Lee, president of Wild Oats, said this line would be priced below the premium Wild Oats line, which is mostly organic. Nonetheless, Down to Earth items will not have artificial ingredients, preservatives or colors. Lee told SN in early October the company hoped the new line would attract more crossover customers, who perceive natural products as being too expensive.
Lewis told the analysts that until recently, "we didn't try as hard as our competitors to grab crossover customers."
The store plans to launch about 25 items at the end of this month, but the actual program rolls out next year and will include "literally hundreds of products," Lewis said in the conference call.
"We are going to be very aggressive with plans to [market] our private label," Lee said. He also told the analysts to expect the company "to increase its presence" in nonfood categories, such as "fragrance and hair care" products.
Discussing strategy for the fourth quarter and beyond, Lewis said the company wants to improve on the $17 average receipt customers are ringing up in Wild Oats' stores. Although the number represents a 50-cent hike over the previous quarter, "we're looking to drive that average sale up in the future," she said.
Also, Lee said the company was having more success than in the past with its produce sales due to a new "farm-to-market format." Predicting Wild Oats would grab "a bigger produce presence," Lee said, "We're not convinced we have the magic bullet, but we're very encouraged."
