AUSTIN, Texas -- Whole Foods Market here said last week that lower-than-expected comparable-store sales, coupled with higher-than-expected utilities costs, combined to push earnings per share for the first quarter 4 cents below expectations.
The company noted that comps had been running at 8.6% for the initial 11 weeks of the 16-week first quarter, ended Jan. 14, but plunged to an average of 4.2% for the four-week period around Christmas and New Year's Eve. Last year, the company said, comps averaged 12.5% during the four-week holiday period.
Whole Foods said it has revised it sales comp guidance to between 5% and 7% per quarter, down from the previous estimate of 7% to 9%. The company's revised sales guidance for the full fiscal year is 15% to 20%. For fiscal 2002,
Whole Foods said it expects sales growth to remain in the 15% to 20% range, but added it expects to realize margin improvements by leveraging store expenses.
In a conference call following the release of Whole Foods' first-quarter results, a lively debate developed between some analysts and company management about the reason for the downturn in comps. These analysts said the downturn could easily be attributed to the comparison of 2000's normal holiday season with the flurry of Y2K-panic-inspired buying that greeted the end of 1999. John Mackey, Whole Foods' chairman and chief executive officer, preferred to explain the decline in comps to "expectations for a slowing economy," even though he admitted that the company has yet to see any signs of an economic slowdown.
Mackey said the company's comps for the first four weeks of the second quarter are up, with business being particularly strong in northern California, the Southwest and the Northeast. He also said sales of prepared foods continue to increase, while sales of vitamins and nutritional supplements remain weak.
"We're just uncertain about where the economy is going to go," he said. "We think it's prudent on our part to be conservative."
Mackey said Whole Foods expects to expand by 15 to 20 stores this year, and that some of those new stores could be acquisitions. "We're looking everywhere north of the Rio Grande, both in Canada and the U.S.," he said. "We're seeing some softening in real estate prices, some opportunities, and I believe we'll see some acceleration in the development pipeline."
For the first quarter, net sales were up 21% to $643.4 million and net income rose 11.1% to $15 million. Comparable-store sales were up 7.3%, while identical-store sales rose 6.5%.