WILD OATS MARKETS IS ON NEW-STORE ROLLOUT

David Ghitelman

BOULDER, Colo. -- Wild Oats Markets here said last week it will focus its energies on opening as many new stores as it can over the next few years -- 15 to 20 new stores in 2004 and 20 to 25 the following year.

During a conference call with industry analysts to discuss results for the second quarter and first half ended June 28, Perry Odak, Wild Oats' president and chief executive officer, said, "Our future is in new stores."

Ed Dunlap, the company's chief financial officer, said during the call that Wild Oats has signed a total of 30 leases or letters of intent for new store sites.

The company said it has two new Wild Oats format stores opening in the third quarter, one of which debuted last week in Lexington, Ky., with the other scheduled to open in Franklin, Tenn., in September.

Wild Oats said it will open four stores in the fourth quarter: three Wild Oats format stores in Park City, Utah; Denver; and Colorado Springs, Colo.; and one Henry's Marketplace format store in Chino Hills, Calif.

The company also said it will continue its aggressive remodeling program -- renovating 20 stores a year in 2003 and 2004. Dunlap said Wild Oats has remodeled 15 stores so far this year.

On a less positive note, Odak said the company was revising its guidance on comparable-store sale results down to 1% to 2% from its earlier estimate of 4% to 7%. He added that the company was not revising its earnings guidance for 2003.

Comps in the second quarter were essentially flat, declining 0.1%. Dunlap said a variety of factors depressed comps, including road construction in front of five stores. He noted that Wild Oats has been "experiencing gradual improvement in comparable-store sales in the third quarter."

He also said the company's gross profit margin declined 80 basis points in the quarter to 29.4% of sales. He attributed this decline to "challenging" produce costs caused by unseasonably wet spring weather, strong redemption rates in the company's direct-mail coupon program, and the sale "of slow-moving inventory through aggressive markdowns."

Despite the flat comps and declining margins, net income increased dramatically in the 13-week quarter and 26-week first half, a development the company attributed to reduced in-store expenses.

In the quarter, sales rose 2.6% to $242.2 million, net income was up 45.7% to $2.2 million, and earnings per share were 7 cents, compared with 6 cents in last year's second quarter.

For the 26-week first half, sales increased 1.9% to $478.2 million, net income jumped 67.3% to $3.6 million, and earnings per share were 12 cents, compared with 9 cents in last year's first half.