AUSTIN, Texas - Whole Foods Market here said the move by Wal-Mart Stores, Bentonville, Ark., to offer more organic product should only help to increase the number of suppliers and lower purchasing costs for everyone in the long run.
In a conference call discussing its results for the 12-week second quarter that ended April 9, in which the natural/organic retailer posted its 10th consecutive quarter of double-digit comparable-store sales growth, Whole Foods said it doesn't expect any negative impact at all from Wal-Mart's encroachment onto its turf.
"It's always somebody else picking up these products, and we keep seeing double-digit comps," said John Mackey, chairman and chief executive officer, Whole Foods. "Yes, they are going to pick up a few hundred SKUs, but we've got 30,000 of them.
"Wal-Mart's certainly a formidable competitor not to be taken lightly," he added, "but we think at the end of the day it's going to improve supply availability, lower prices and help make us a better retailer."
The company also said it plans to ramp up new store openings aggressively in 2007, noting that it has 78 stores averaging 55,400 square feet in the pipeline altogether. That's about 5,000 square feet larger than the stores the company has opened thus far this year and continues a trend of the company opening larger and larger stores.
It also said that based on its sales performance through the first half of 2006, it raised its sales projections for the full year to be at the high end of its previously stated goal of 18%-21%, and it now expects comp-store sales to be in the range of 10%-12%, vs. the previously stated range of 8%-11%.
In the recently ended quarter, the company said net income rose 27% to $51.8 million, on a sales gain of 21%, to $1.3 billion, compared with year-ago results. Comps were up 11.9%.
For the 28-week first half, net income was up 27%, to $110.1 million, on a sales gain of 21%, to $3 billion. Comps for the 28-week span rose 12.5%.
Although the company's stock price also rose in double digits after the report, analysts were hesitant to recommend it because earnings are not expected to grow as fast as sales.
"Despite an outstanding longer-term growth profile - 15%-20% square footage growth - the stock is too expensive, in our view," said Steve Chick, analyst, J.P. Morgan Securities, New York, in a research note.