BOULDER, Colo. - Wild Oats Markets last week said it would open a new, larger prototype store in its headquarters market here and would expand "significantly" the square footage of several older stores scheduled to undergo remodels.
"We think this will be the most revolutionary design ever executed in the retail grocery industry," said Perry Odak, president and chief executive officer, in a conference call with analysts discussing results for the fiscal year ending Dec. 31, 2005.
Although he declined to provide details about the new flagship, he said it would be the largest store in the chain - exceeding 40,000 square feet - and would "showcase and enhance" the company's perishables offering. He also said it would make the company more competitive "against any of the big-box stores that are out there. We believe it will also be something that no other conventional retailer will ever be able to follow."
It is scheduled to open in late 2006 or early 2007.
Analysts had been critical of the company's existing store format, which many had said was too small to compete with its larger and faster-growing rival in the natural food space, Whole Foods Market, Austin, Texas.
In addition to the Boulder flagship, the company also said it would use the new design for a relocation in Fort Lauderdale, Fla. Up to six stores will receive major remodels to expand the square footage this year, the company said, at a cost of about $1 million per store.
The news of the new design came as the company reported results for the fourth quarter that were better than some analysts had expected. The company posted net income for the three-month quarter of $3.3 million, vs. a loss of $34.7 million in the year-ago period. Sales were up less than 1%, to $282.7 million, but increased 7.2% excluding the extra week in the 2004 fiscal fourth quarter. Comparable-store sales were up 4.2% for the quarter.
Fourth-quarter gross margins were 29.7% of sales, vs. 27.4% in the fourth quarter of a year ago.
The company attributed the profit gains to increases in private-label sales and other factors, including more efficient use of its Riverside, Calif., distribution center and better use of promotions. Odak said private-label sales were up 35% in 2005, and he expected similar gains for 2006 as the company plans to add 300 store-brand items to its existing line of 1,100. It also plans to continue to expand its conventional offerings.
The company said it planned to open about 10 new stores in fiscal 2006, and it plans to close three stores. Capital expenditures are projected to be between $55 million and $60 million, most of which is for new-store development.
The company said the pending sale of Albertsons could put some attractive properties on the market, although it also said it has experienced some construction delays because contractors have been tied up in post-hurricane projects.
For the year, Wild Oats said net income totaled $3.2 million, vs. a loss of $40 million in fiscal 2004. Sales for the year rose about 7.2%, to $1.1 billion.
For the current year, Wild Oats projected comparable-store sales in the 4% to 5% range and gross margins of about 30%.
