BOULDER, Colo. -- Wild Oats Markets here said it would revise a restructuring plan announced earlier this year in reaction to continued poor comparable store sales and disappointing earnings.
The company said it would close or sell eight stores and would embark on a multi-million dollar initiative to add key management positions, train store employees, price items more competitively and begin a "robust" media campaign. These changes come in addition to Wild Oats' initial restructuring announced in May. That plan included the sale or closure of eight more stores as well as an ambitious remodeling plan designed to increase the size and product offerings at its stores.
The restructuring will delay expected revenue growth rates throughout the coming year, the company said. It also said it expected sales to be flat throughout 2001. The company's stock plummeted 55% on the news, falling to a new low.
In a conference call discussing third-quarter earnings, Mike Gilliand, Wild Oats' chief executive officer, said the additional measures came as a result of recommendations from independent consultants and interviews with store employees and shoppers.
"Management has spent months drilling down and interpreting the results of this research and what it confirmed was that the strategic direction we described in May is the right course to be going," Gilliand said. "But our September store results and recent data revealed a much larger scope had to be taken."
Comparable-store sales at Wild Oats fell 3% in the third quarter -- exceeding the company's projection of a 2% decline -- according to Mary Beth Lewis, Wild Oats' chief financial officer. Wild Oats saw 2% drops in comparable store sales in the the first two quarters of 2000, Lewis said, adding that Wild Oats is now expecting comps to fall between 4% and 5% during the fourth quarter.
According to Gilliand, Wild Oats' additional restructuring plan includes a plan to hire a senior vice president of retail and executive-level heads of training and business development. Its new pricing strategy includes more everyday low prices, and better prices on items appealing to "crossover" shoppers. A training program will result in better and more consistent customer service, he said.
Jonathan Ziegler, a San Francisco-based managing director for Deutsche Banc Alex. Brown, New York, told SN last week that the changes being undertaken by Wild Oats appear to be the correct path, but added it would be a difficult one.
"They have a major challenge in front of them," Ziegler said. "At least they know what they have to do. I just can't say how fast they can get it done."
Wild Oats did not identify the eight additional stores to be closed. According to Lewis, the closures will allow Wild Oats to finish the year with 101 stores. Wild Oats said it would open seven new stores and relocate four others during 2001.
Gilliand said the company's spate of acquisitions in 1999 -- nearly doubling its store count since the beginning of that year -- resulted in integration problems leading to the recent comp-store struggles.
"It put a lot of pressure on our existing infrastructure and diverted our attention from store productivity," he said.
He added that acquisitions will be a smaller component of the company's strategy in the near future.
Gilliand during the earnings call was asked if the company was considering a sale or change in management. He did not comment on selling the company but said, "If we don't move the needle maybe you're talking to a different management team this time next year. But we're very confident we can pull this off."
For the quarter ending Sept. 30, Wild Oats reported sales of $207.2 million, an increase of 11% over $186.5 million. Earnings were $1.1 million compared to $4.5 million in the same period in 1999.
For the nine months, Wild Oats said sales were $631.2 million, up 22%. Earnings were down from $12.9 million to $11 million.