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Whole Foods Market, Inc. (NASDAQ:WFM) Believes Strong Long-term Growth

Boston, MA 05/21/2014 (wallstreetpr) – Whole Foods Market, Inc.  (NASDAQ:WFM) reported the results for the second quarter ended April 13, 2014 with strong growth in store sales.

Operating highlights

In the second quarter, the Company’s total sales increased by 10% to $3.3 billion due to increased sales over comparable and identical stores. The shifting of Ester affected the operation, but, the growing demand along with the relocation and expansion of comparable and identical stores increased the store sales by 6.9% versus prior year period.

Gross margin during the period was 35.9%, down by 51 basis points (bps) with increasing costs of sales (2Q2013: 36.4%). In addition, the rising wages and healthcare costs increased the direct store expenses to 25.3%. As a result, the store contribution decreased by 41 bps to 10.6% of sales and operating margin to 7% (2Q2013: 7.5%).  So, the adjusted EBITDA during the period was $343 million with a margin of 10.3%. Net income remained flat at $142 million with diluted EPS of $0.38.

During the quarter, the Company produced operating cash flow of $282 million and used $143 million in capital expenditures, which includes $85 million related to the development of new stores. As a result, free cash flow for 2Q2014 was $139 million (2Q2013: $178 million).

In addition, Whole Foods Market, Inc.  (NASDAQ:WFM) paid a dividend of $45 million and used $55 million in repurchase of stock and ended up with net cash balance of $305 million as of April 13, 2014.

Growth prospects

Based on Whole Foods’ year to date sales and earnings results, the retailer updated the guidance for FY2014. The Company expects sales growth of 10.5% -11% with increasing comparable store sales growth of 5.0%- 5.5%. So, the increasing store sales will improve the operating margin by 6.5% -6.6% with EBITDA at range of $1.29-$1.32 billion and anticipates diluted EPS of $1.52-$1.56.

Whole Foods Market, Inc.  (NASDAQ:WFM) continues to spend on technology and remodel and expand the store locations to enhance growth, therefore, expects capital expenditures of $675 to $725 million In FY2014.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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