Post Earnings Coverage as Whole Foods Quarterly Revenue Grew 1.9%

Upcoming AWS Coverage on Kroger Post-Earnings Results

LONDON, UK / ACCESSWIRE / February 28, 2017 / Active Wall St. announces its post-earnings coverage on Whole Foods Market, Inc. (NASDAQ: WFM). The Company posted its first quarter and fiscal 2017 financial results on February 08, 2017. The Austin, Texas based grocery-store chain’s earnings numbers met market expectations. Register with us now for your free membership at:

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One of Whole Foods Market’s competitors within the Grocery Stores space, The Kroger Co. (NYSE: KR), announced on February 16, 2017, that it will host a conference call with investors on Thursday, March 02, 2017 at 10 a.m. ET to discuss financial results for Q4 2016. AWS will be initiating a research report on Kroger in the coming days.

Today, AWS is promoting its earnings coverage on WFM; touching on KR. Get our free coverage by signing up to:

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Earnings Reviewed

For the 16-week first quarter ended January 15, 2017, Whole Foods reported that total sales increased 1.9% to a record $4.92 billion compared to total sales of $4.83 billion in Q1 FY16. The Company’s comparable store sales decreased 2.4% on a y-o-y basis. Whole Foods revenue numbers came in below analysts’ consensus of $4.98 billion.

For Q1 FY17, Whole Foods gross margin declined 43 basis points to 33.6% driven by increases in occupancy costs and cost of goods sold as a percentage of sales. Excluding the charge related to a separation agreement, SG&A increased 12 basis points to 28.6% of sales.

During Q1 FY17, Whole Foods earned $95 million, or $0.30 per share, compared to $157 million, or $0.47 per share, in the year-ago same period. Adjusted for one-time items, Whole Foods reported earnings of $123 million, or $0.39 per share, compared to $157 million, or $0.46 per share, in Q1 FY16. The Company’s reported quarter results included a $34 million charge related to store and facility closures, and a charge of $13 million, or $0.03 per diluted share, associated with a separation agreement. Whole Foods stated that it expects to incur an additional charge in Q2 FY17 of approximately $30 million, or 0.06 per share, in relation to store and facility closures. The Company’s earnings numbers came in in-line with market expectations.

During Q1 FY17, Whole Foods’ earnings before interest, taxes, depreciation, and amortization (“EBITDA”) were $360 million, or 7.3% of sales. EBITDA margin was 7.6% and return on invested capital was 12%.

Cash Flow & Balance Sheet

During Q1 FY17, the Company produced $284 million in cash flow from operations, invested $245 million in capital expenditures, and returned $43 million in quarterly dividends to shareholders. The Company ended the quarter with $1.1 billion of total debt and $1.2 billion of total available capital.

Growth and Development

In Q1 FY17, Whole Foods opened 13 stores, including two relocations. On February 08th, 2017 in the second quarter, the Company has opened three stores, including one relocation, and it expects to open three additional stores including one relocation. The Company also closed one commissary kitchen and will be closing nine stores and its last two remaining commissary kitchens during the quarter. The Company recently terminated two leases and signed four new leases and currently has 93 stores in development.

In the conference call, Whole Foods announced that it will continue to grow, but no longer have a goal of 1,200-plus stores. The Company stated that it remains optimistic about the future growth potential for its 365 format, but want to see how these next rounds of stores perform before getting more aggressive. Whole Foods noted that for long-term success, it has evaluated its portfolio of stores, and have made the difficult, but prudent decision to close nine stores in Q2 FY17. As of November 02, 2016, the Company operated 464 stores in the United States, Canada, and the United Kingdom.

Fiscal Year 2017 Outlook

For FY17, Whole Foods is forecasting sales growth of 1.5% or above and is anticipating Comps to decline at most 2.5%. The Company now envisions earnings per share of $1.33 or greater for FY17.

The Company plans to reduce its cost structure in FY17 but expects these savings to be more than offset by investments in marketing, value, and technology as well as higher occupancy, depreciation, and other costs. In addition, the Company is estimating additional costs of approximately $14 million, or $0.03 per diluted share, related to its recent decision to accelerate the implementation of category management, the majority of which it expects to incur in the fourth quarter. Therefore, the Company now expects a decline in operating margin of approximately up to 85 basis points for the year, with greater declines of up to 115 basis points in the second and fourth quarters.

Stock Performance

At the closing bell, on Monday, February 27, 2017, Whole Foods Market’s stock slipped 1.46%, ending the trading session at $31.10. A total volume of 4.63 million shares were traded at the end of the day. In the last six months and previous twelve months, shares of the Company have advanced 1.26% and 1.83%, respectively. Moreover, the stock gained 1.57% since the start of the year. The stock is trading at a PE ratio of 22.49 and has a dividend yield of 1.80%.

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