AUSTIN, Texas -- Whole Foods Market here plans to discontinue Amrion, its direct marketing and nutritional supplement manufacturing company, so it can concentrate on its core natural foods retail business, John Mackey, chairman and chief executive officer, said here last week.
"I feel like I'm waking up from a bad dream," Mackey told investors during a conference call last week. "Amrion and WholePeople [an e-commerce business for natural products and nutritional supplements that was part of Amrion until it was merged with another e-commerce business in June] have been major distractions, and this has been the hardest year of my business career. But they are both fully behind us now, and the core Whole Foods retail franchise has never been stronger, as will be very clear over the next several quarters."
Mackey said Whole Foods decided to discontinue Amrion, rather than pursue other strategies, "because our shareholders invested in Whole Foods because they liked our core business, and that business has been overshadowed by WholePeople and Amrion."
Mackey said Whole Foods has signed a definitive agreement to purchase all of Amrion's common stock from its venture capital investors and plans to "aggressively pursue" a sale of its direct marketing and manufacturing divisions. Sales for the year rose 23.2% to $1.8 billion and comparable store sales rose 8.6%, while net income increased 3.6% to $43.5 million. For the 12-week fourth quarter sales jumped 22.5% to $438.3 million and comparable store sales rose 8.6%, while net income fell 34.5% to $4.8 million, reflecting writedowns from discontinuing Amrion, Mackey said.
He said he estimates the potential for natural food supermarkets in the United States is approximately 400 stores, and he reiterated Whole Foods' goal of operating 200 stores with sales of $4 billion by 2004.
"We believe there continue to be significant opportunities available for new Whole Foods stores in new markets, and we have yet to reach saturation in any of our existing marketplaces," Mackey said. "The concept of natural and organic foods continues to become more mainstream and thus the number of potential Whole Foods stores continues to grow."
In other highlights of the conference call:
Mackey said Whole Foods' 117 stores operate in 30 of the Top 50 metropolitan markets, with plans to enter three new markets -- Pittsburgh, Toronto and Portland, Ore. -- in 2001.
He said Whole Foods expects to spend $180 million to $190 million on capital expenses in 2001, an increase of approximately 18% over the $157 million spent in 2000.
Glenda Flanagan, chief financial officer, said the average age of Whole Foods' stores is 5.5 years, the average size is 27,000 square feet and the average comps are 8.6%. She said 44% of the stores are five years old, average 22,000 square feet and have comps of 5%; 37% are two to five years old, average 30,000 square feet and have comps of 10%; and 19% are one to two years old, average 35,000 square feet and have comps of 34%.