Natural foods grocery chain Whole Foods Market Inc. (WFMI) said Wednesday that its fourth quarter profit plunged from last year, hurt mainly by the impact of Wild Oats acquisition costs as well as the negative economic environment. The company also revised its outlook for fiscal year 2009. In addition, the company said it has agreed to sell about 17% of its ownership interest to Green Equity Investors V L.P. for $425 million. Following the news, the company's stock gained more than 17% in the after-hours trading.
Q4 results
Net earnings for the fourth quarter were $1.5 million or $0.01 per share, significantly lower than $33.9 million or $0.24 per share in the prior year quarter. On average, 17 analysts polled by First Call/Thomson Financial expected the company to earn $0.13 per share for the fourth quarter.
The Austin, Texas-based company estimates the impact of Wild Oats acquisition costs in the quarter was about $25.4 million, pre-tax, or $0.09 per share. The company bought its peer Wild Oats last year for $565 million.
Sales for the fourth quarter increased 13% to $1.8 billion from $1.7 billion in the same quarter of last year. Fifteen analysts had a consensus revenue estimate of $1.81 billion for the fourth quarter.
Excluding the year-ago sales from divested Henry's and Sun Harvest stores as well as closed Wild Oats stores, sales for the quarter increased 16%.
Comparable store sales for the fourth quarter increased 0.4%, compared to an 8.2% growth in the previous year quarter. Identical store sales, excluding eight relocated stores and two major expansions, decreased 0.5% over an increase of 6.0% a year ago.
The Wild Oats stores entered the comparable and identical store sales base in the fifty-third full week following the August 28, 2007 merger date and were included in results for the last four weeks of the quarter.
Pre-opening expenses for the first quarter fell to $15.15 million from $18.60 million, while relocation, store closure and lease termination costs surged to $27.16 million from $4.67 million last year.
In a separate development, Whole Foods announced that it has agreed to sell series A preferred stock due 2020, representing an ownership interest of about 17% to Green Equity Investors V L.P., an affiliate of Leonard Green & Partners L.P. for $425 million.
The preferred stock has an 8% dividend, payable quarterly in cash or by increasing the liquidation preference, at the option of the company, and will be convertible, under certain circumstances, to common stock at an initial conversion price of $14.50 per share.
After three years, the dividend will be reduced to 6% if the common stock closes at or above $17.75 per share for at least 20 consecutive trading days, or 4% if the common stock closes at or above $23.13 per share for at least 20 consecutive trading days.
The transaction is expected to close within thirty days, subject to the receipt of customary regulatory approvals.
Full year results
For the full year 2008, Whole Foods posted net earnings of $114.5 million or $0.82 per share, compared to $182.7 million or $1.29 per share in the previous year. Annual sales increased to $7.95 billion from $6.59 billion in the preceding year.
Street expected the company to report earnings of $0.94 per share for the year on revenue of $7.99 billion.
Outlook
For fiscal year 2009, the company now anticipates earnings of $0.95 to $1.00 per share, excluding about $0.06 to $0.08 per share in estimated dilution from FTC-related legal costs and an estimated $0.19 impact from the Preferred Series A stock. Sales are expected in the range of $8.3 billion based on flat comparable store sales.
The company has chosen not to give comparable store sales growth guidance at this time, blaming the uncertain and rapidly changing economic environment.
Analysts currently project earnings of $1.02 per share on revenue of $8.48 billion for the full year 2009.
Earlier, earnings per share for 2009 were expected in the range of $1.08 to $1.14, including about $0.07 to $0.09 per share in dilution from Wild Oats and about $0.06 per share in dilution from the company's U.K. operations. The company expected total sales growth in fiscal year 2009 of 6% to 10%. Comparable store sales growth was expected to be 1% to 5%.
Stock movement
Whole Foods closed Wednesday's regular trading session at $10.31, down 68 cents or 6.19% on a volume of 5.82 million shares. In the after-hours, the shares gained $1.84 or 17.85%. The stock has been moving in a range of $9.91 - $50.00 for the past 52 weeks, with a three-month average volume of about 4.34 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.