Post Earnings Coverage as Whole Foods’ Outperformed Revenue Estimates; Hiked Dividend by 29%

Upcoming AWS Coverage on Smart & Final Stores Post-Earnings Results

LONDON, UK / ACCESSWIRE / May 26, 2017 / Active Wall St. announces its post-earnings coverage on Whole Foods Market, Inc. (NASDAQ: WFM). The Company announced its second quarter fiscal 2017 financial results on May 10, 2017. The grocery chain revenue increased 1.1% on a y-o-y basis and also announced board reshuffling with a change in CFO. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Kroger’s competitors within the Grocery Stores space, Smart & Final Stores, Inc. (NYSE: SFS), reported on May 03, 2017, its financial results for the fiscal first quarter ended March 26, 2017. AWS will be initiating a research report on Smart & Final Stores in the coming days.

Today, AWS is promoting its earnings coverage on WFM; touching on SFS. Get our free coverage by signing up to:
http://www.activewallst.com/register/.

Earnings Reviewed

For the 12-week second quarter ended April 09, 2017, Whole Foods’ total sales increased 1.1% to a record $3.74 billion compared to net sales of $3.70 billion in Q2 FY16. The Company’s revenue numbers surpassed analysts’ consensus of $3.73 billion. Including an estimated negative impact of 30 basis points from Easter shifting from Q2 FY16 to Q3 FY17, comparable store sales decreased 2.8%.

For Q2 FY17, Whole Foods’ gross margin declined 82 basis points to 34.1% driven by increases in occupancy costs and cost of goods sold as a percentage of sales. LIFO charges were $3 million versus $2 million last year, a negative impact of three basis points. The Company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) were $287 million, or 7.7% of sales, for the reported quarter.

Whole Foods reported net income of $99 million, or diluted earnings per share, of $0.31 for Q2 FY17 compared to net income of $142 million, or diluted earnings per share of $0.44. The Company’s results included a charge of $30 million, or $0.06 per diluted share, related to previously-announced store and facility closures. Excluding this charge, Whole Foods net income was $117 million, or diluted earnings per share of $0.37, matching Wall Street’s estimates of $0.37 per share.

During Q2 FY17, Whole Foods produced operating cash flow of $340 million, free cash flow of $209 million, and returned $45 million in dividends to shareholders, ending the reported quarter with $1.4 billion of total available capital and $1.0 billion in total debt.

CFO Change

In a separate press release on May 10, Whole Foods announced the appointment of Keith Manbeck as Executive Vice President and Chief Financial Officer (CFO), effective May 17, 2017. Mr. Manbeck will join a leadership team that is implementing an accelerated plan to enhance shareholder value in a dynamic and increasingly competitive marketplace.

Mr. Manbeck brings to Whole Foods Market more than 20 years of financial and operational experience at leading companies, most recently serving as Senior Vice President of Digital Finance, Strategy Management and Business Transformation at Kohl’s Corporation since 2014.

New Board Leadership and 5 New Independent Directors

On May 10, 2017, Whole Foods announced a significant reshuffling of its Board of Directors by appointing five new independent directors, effective immediately:

1) Ken Hicks, former Chairman, President, and Chief Executive Officer of Foot Locker;
2) Joe Mansueto, Founder and Executive Chairman of Morningstar;
3) Sharon McCollam, the former Executive Vice President, Chief Administrative and Chief Financial Officer of Best Buy;
4) Scott Powers, who held leadership positions at State Street Corporation from 2008 to 2015;
5) Ron Shaich, Founder, Chairman, and Chief Executive Officer of Panera Bread Company.

The Company also announced that Gabrielle Sulzberger has been appointed the new Chair of the Whole Foods Market Board of Directors and Mary Ellen Coe has been appointed the new Chair of the Nominating & Governance Committee.

With these changes, the Whole Foods Market’s Board of Directors will be comprised of 12 directors, 10 of whom are independent, and out of the 10, 6 were added in the last seven months.

Growth and Development

In Q2 FY17, Whole Foods opened six stores, including two relocations, and closed nine stores, as previously announced. The Company also closed one store for a major remodel and one store that will be relocated in the fourth quarter. So far in the third quarter, the Company has opened three stores, including one Whole Foods Market 365 store. Whole Foods expects to open three additional stores including one relocation during the coming quarter.

Returning Capital to Shareholders

Whole Foods’ Board of Directors announced a 29% increase in the regular quarterly dividend to $0.18 per share and authorized a new $1.25 billion share repurchase program, with the intent to opportunistically utilize the authorization over the next 18 months. The new authorization will replace the Company’s existing program. The next quarterly dividend to be declared is expected to be paid on July 11, 2017, to shareholders of record as of June 30, 2017.

Updated Outlook

For FY17, Whole Foods is projecting sales growth of 1% or greater and expects comps to decline as much as 2.5%. The Company is estimating EBITDA margin of approximately 8% and diluted earnings per share of $1.30 or more for the fiscal year.

Longer-term Targets

The Company expects to return to positive comparable store sales and earnings growth by the end of fiscal year 2018. In addition, based on the implementation of new and accelerated initiatives, for fiscal 2020, Whole Foods envisions total sales of more than $18 billion, comps growth of over 2%, EBITDA margin of above 9.5%, and cash flow from operations greater than $1.2 billion.

Stock Performance

On Thursday, May 25, 2017, the stock closed the trading session flat at $35.32, with a total volume of 3.56 million shares traded. Whole Foods Market’s stock price surged 11.91% in the last three months, 13.72% in the past six months, and 10.17% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have rallied 14.82%. The stock is trading at a PE ratio of 25.54 and has a dividend yield of 2.04%.

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