Accelerated Affinity Rollout by CYE 2017
Category Management Fully Implemented by FYE 2018
Return to Positive Comps and Earnings Growth by FYE 2018
Additional $300 Million in Cost Savings Realized by FYE 2020
Financial Targets Provided for FY 2020
Increased Commitment to Return Capital to Shareholders, including 29% Dividend Increase
Record Q2 Sales of $3.7 Billion; GAAP EPS of $0.31; and Adjusted EPS of $0.37
AUSTIN, Texas, May 10, 2017 (GLOBE NEWSWIRE) -- Whole Foods Market, Inc. (NASDAQ:WFM) today provided a
comprehensive shareholder update regarding new and accelerated initiatives to increase profitability, improve operational
performance, and enhance shareholder value, including 2020 financial targets. In addition, the Company reported results for the
12-week second quarter ended April 9, 2017.
“We are accelerating our path to enhanced value creation to deliver better returns for our shareholders,” said
John Mackey, co-founder and chief executive officer of Whole Foods Market. “Today’s announcement is a powerful combination of
accelerated initiatives and new cost savings with clear timelines to deliver. We are on a path to return to positive comparable
store sales and earnings growth next year. Our increased dividend and new share repurchase authorization demonstrate our Board’s
confidence in our long-term growth strategy and continued ability to generate strong cash flow. The Board will continue its
comprehensive review of all opportunities to create value. We look forward to continuing our dialogue with shareholders and
providing future updates on our progress.”
Update on Strategic Initiatives
The Company has identified a detailed path to sustained top-line growth, supported by category management and pricing initiatives,
enhanced marketing and Affinity programs, and disciplined organic growth. Key components include:
- Accelerating Affinity rollout to all U.S. stores by CYE 2017. The new program combines the best elements of
the Company’s My 365 Rewards and pilot programs, which have successfully driven increased trips and bigger baskets from
participants by providing more personalized and relevant communications as well as new digital experiences.
- Restructuring purchasing program by CYE 2017 and implementing category management across all U.S. stores by FYE
2018. Robust data analytics, state-of-the-art technology and a unified purchasing structure will provide optimized
product assortment and pricing, leading to lower costs, lower prices and higher sales.
- Returning to positive comps and earnings growth by FYE 2018, and providing FY 2020 financial targets based on the
execution of new and accelerated initiatives. For 2020, the Company expects to achieve:
- Total sales of over $18 billion
- Comparable store sales growth greater than 2.0%
- SG&A as a percentage of sales of less than 27%
- EBITDA margin greater than 9.5%
- Cash flow from operations of over $1.2 billion
- Realizing $300 million in additional cost savings by FYE 2020. Key components include: store labor
transformation including standardization of in-store processes and labor allocation; support function efficiencies; and supply
chain optimization through an accelerated order-to-shelf rollout. The Company also has engaged a top-tier consulting firm to help
identify and support the implementation of these new cost savings measures. These savings are in addition to the $270 million
already realized as part of the Company’s prior cost reduction plan, which is on track to reach $300 million by FYE 2017.
Increased Commitment to Return Capital to Shareholders
Today, the Company’s Board of Directors announced a new capital allocation strategy that reflects confidence in the Company’s
future growth and cash flow generation, while expanding its commitment to return capital to shareholders. As part of this strategy,
the Board 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 payable on July 11, 2017
to shareholders of record as of June 30, 2017.
Board Additions and New CFO
In separate releases today, Whole Foods Market announced the appointment of five new independent directors and named Gabrielle
Sulzberger the new Chair of the Board and Mary Ellen Coe the new Chair of the Nominating & Governance Committee. The Company also
announced the appointment of Keith Manbeck as its new Chief Financial Officer.
Second Quarter 2017 Results
For the 12-week second quarter ended April 9, 2017, total sales increased 1.1% to a record $3.7 billion. Including an
estimated negative impact of 30 basis points from Easter shifting from the second quarter last year to the third quarter this year,
comparable store sales decreased 2.8%. Net income was $99 million, or 2.6% of sales; diluted earnings per share were $0.31; and
earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $287 million, or 7.7% of sales. The Company
produced operating cash flow of $340 million, free cash flow of $209 million, and returned $45 million in dividends to
shareholders, ending the quarter with $1.4 billion of total available capital and $1.0 billion in total debt.
As expected, results included a charge of $30 million, or $0.06 per diluted share, related to
previously-announced store and facility closures. Excluding this charge, net income was $117 million, or 3.1% of sales;
diluted earnings per share were $0.37; EBITDA margin was 8.5%; and return on invested capital was 11%. Please refer to the
reconciliation of GAAP measures to non-GAAP measures at the end of this release.
The following table provides information on the Company’s comparable store sales for the second quarter,
including the negative Easter shift, and for the 15 weeks ended April 30, 2017. Results for the 15-week period represent the
12-week second quarter and the first three weeks of the third quarter to include Easter and Passover in both years.
| |
Comps |
|
Change in
Transactions |
|
Change in
Basket Size |
|
Q2 ended April 9, 2017
|
(2.8)% |
|
(3.0)% |
|
0.2%* |
|
| |
|
|
|
|
|
|
| Fifteen weeks ended April 30, 2017 |
(2.5)% |
|
(3.1)% |
|
0.6%* |
|
*Reflects an increase in items per transaction
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.
SG&A increased 45 basis points to 28.3% of sales. A 29 basis point improvement in salaries and benefits was more than offset
by higher marketing and depreciation expenses as a percentage of sales.
Year-to-Date Results
For the 28-week period ended April 9, 2017, total sales increased 1.5% to $8.7 billion. Comparable store sales decreased 2.6%,
including the negative impact of the Easter shift. Average weekly sales per store were $663,000, translating to sales per gross
square foot of approximately $880. Net income was $194 million, or 2.2% of sales; diluted earnings per share were $0.61; and EBITDA
was $648 million, or 7.5% of sales. The Company produced operating cash flow of $624 million, free cash flow of $248 million, and
returned $88 million in capital to shareholders through dividends and share repurchases. Results included charges of $63 million,
or $0.12 per diluted share, related to store and facility closures and $13 million, or $0.02 per diluted share, associated with Mr.
Robb’s separation agreement. Excluding these charges, net income was $240 million, or 2.8% of sales; diluted earnings per
share were $0.75; EBITDA margin was 8.0%; and return on invested capital was 11%.
Growth and Development
In the second quarter, the Company 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. The Company expects to open three
additional stores, including one relocation, during the quarter.
Fiscal Year 2017 Updated Outlook
The Company’s outlook excludes $76 million, or $0.14 per diluted share, in charges incurred in the first and second quarters, as
well as potential future LIFO adjustments and share repurchases.
The Company remains focused on the metrics it believes are key to the long-term health of its business, and is
targeting:
- Sales growth of 1.0% or greater
- Comps of approximately -2.5% or better
- Ending square footage growth of approximately 5% net of closures, reflecting approximately 30 new stores, including up to
seven relocations and three 365 stores
- Diluted EPS of $1.30 or greater
- EBITDA margin of approximately 8%
- Capital expenditures of approximately 4% of sales
- ROIC of approximately 11%
The Company’s outlook implies 0.5% sales growth in the second half of the year, primarily reflecting the impact
of recent closures, including stores closed for relocations and a major remodel. The Company is on track to achieve its cost
reduction goal 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 now estimating additional costs of approximately $16
million, or $0.03 per diluted share, related to the accelerated rollout of Affinity and other technology initiatives as well as the
engagement of a consulting firm related to its cost reduction efforts. Therefore, the Company now expects a decline in operating
margin, excluding LIFO, of up to 70 basis points in the third quarter and 95 basis points in the fourth quarter.
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, the Company has provided the following targets for fiscal year
2020:
- Total sales of over $18 billion
- Comps greater than 2.0%
- SG&A as a percentage of sales of less than 27%
- EBITDA margin greater than 9.5%
- Cash flow from operations of over $1.2 billion
Seasonality
Easter falls in the third quarter of fiscal year 2017 versus the second quarter of fiscal year 2016, negatively impacting
comparable store sales growth in the second quarter and positively impacting comparable store sales growth in the third quarter.
The Company notes that average weekly sales and gross profit as a percentage of sales are typically highest in the second and third
fiscal quarters, and lowest in the fourth fiscal quarter due to seasonally slower sales during the summer months. Gross profit as a
percentage of sales is also lower in the first fiscal quarter due to the product mix of holiday sales.
About Whole Foods Market
Founded in 1978 in Austin, Texas, Whole Foods Market is the leading natural and organic foods supermarket, the first national
“Certified Organic” grocer, and uniquely positioned as America’s Healthiest Grocery Store™. In fiscal year 2016, the Company had
sales of approximately $16 billion and currently has over 460 stores in the United States, Canada, and the United Kingdom. Whole
Foods Market employs approximately 87,000 team members and has been ranked for 20 consecutive years as one of the “100 Best
Companies to Work For” in America by Fortune magazine. For more information, please visit www.wholefoodsmarket.com.
Disclaimer on Forward-looking Statements
Certain statements in this press release and from time to time in other filings with the Securities and Exchange Commission, news
releases, reports, and other written and oral communications made by us and our representatives, constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are
often identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “continue,” “could,” “can,” “may,” “will,”
“likely,” “depend,” “should,” “would,” “plan,” “predict,” “target,” and similar expressions, and include references to assumptions
and relate to our future prospects, developments and business strategies. Except for the historical information contained herein,
the matters discussed in this press release are forward-looking statements that are based on the Company’s current assumptions and
involve risks and uncertainties that may cause our actual results to be materially different from such forward-looking statements
and could materially adversely affect our business, financial condition, operating results and cash flows. These forward-looking
statements may include comments relating to, among other things, future earnings per share and the Company’s intention to obtain
additional debt in the near term and to make planned share repurchases, some of which are subject to risks and uncertainties
relating to general business conditions, conditions in the credit and capital markets, changes in overall economic conditions that
impact consumer spending, including fuel prices and housing market trends, the impact of competition and other factors which are
often beyond the control of the Company, as well other risks listed in the Company’s Annual Report on Form 10-K for the fiscal year
ended September 25, 2016 and Quarterly Report on Form 10-Q for the first quarter ended January 15, 2017, and other risks and
uncertainties not presently known to us or that we currently deem immaterial. We wish to caution you that you should not place
undue reliance on such forward-looking statements, which speak only as of the date on which they were made. We do not undertake any
obligation to update forward-looking statements.
The Company will host a conference call today to discuss this earnings announcement at 4:00 p.m. CT. The dial-in
number is (877) 201-0168, and the conference ID is “Whole Foods.” A simultaneous audio webcast will be available at www.investor.wholefoodsmarket.com.
| Whole Foods Market, Inc. |
|
| Consolidated Statements of Operations
(unaudited) |
|
| (In millions, except per share amounts) |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
12 weeks ended |
|
28 weeks ended |
|
| |
|
|
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Sales |
$ |
3,737 |
|
|
$ |
3,696 |
|
|
$ |
8,656 |
|
|
$ |
8,524 |
|
|
| Cost of goods sold and occupancy costs |
|
2,463 |
|
|
|
2,406 |
|
|
|
5,732 |
|
|
|
5,593 |
|
|
| |
Gross profit |
|
1,274 |
|
|
|
1,290 |
|
|
|
2,924 |
|
|
|
2,931 |
|
|
| Selling, general and
administrative expenses |
|
1,057 |
|
|
|
1,028 |
|
|
|
2,474 |
|
|
|
2,402 |
|
|
| |
Operating income before pre-opening and store
closure |
|
217 |
|
|
|
262 |
|
|
|
450 |
|
|
|
529 |
|
|
| Pre-opening expenses |
|
12 |
|
|
|
18 |
|
|
|
33 |
|
|
|
31 |
|
|
| Relocation, store closure and
lease termination costs |
|
34 |
|
|
|
3 |
|
|
|
74 |
|
|
|
5 |
|
|
| |
Operating income |
|
171 |
|
|
|
241 |
|
|
|
343 |
|
|
|
493 |
|
|
| Interest expense |
|
(11 |
) |
|
|
(11 |
) |
|
|
(26 |
) |
|
|
(18 |
) |
|
| Investment and other income |
|
2 |
|
|
|
5 |
|
|
|
1 |
|
|
|
9 |
|
|
| |
Income before income taxes |
|
162 |
|
|
|
235 |
|
|
|
318 |
|
|
|
484 |
|
|
| Provision for income taxes |
|
63 |
|
|
|
93 |
|
|
|
124 |
|
|
|
185 |
|
|
| |
Net income |
$ |
99 |
|
|
$ |
142 |
|
|
$ |
194 |
|
|
$ |
299 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.61 |
|
|
$ |
0.90 |
|
|
| Weighted average shares outstanding |
|
318.5 |
|
|
|
324.7 |
|
|
|
318.3 |
|
|
|
331.7 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.61 |
|
|
$ |
0.90 |
|
|
| Weighted average shares outstanding, diluted
basis |
|
318.9 |
|
|
|
325.4 |
|
|
|
318.7 |
|
|
|
332.7 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Dividends declared per common share |
$ |
0.140 |
|
|
$ |
0.135 |
|
|
$ |
0.280 |
|
|
$ |
0.270 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows:
|
|
| |
|
| |
|
|
12 weeks ended |
|
28 weeks ended |
|
| |
|
|
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net income |
|
|
|
|
|
|
|
|
| (numerator for basic and diluted earnings per
share) |
$ |
99 |
|
|
$ |
142 |
|
|
$ |
194 |
|
|
$ |
299 |
|
|
| Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
| (denominator for basic earnings per share) |
|
318.5 |
|
|
|
324.7 |
|
|
|
318.3 |
|
|
|
331.7 |
|
|
| |
Incremental common shares attributable to dilutive |
|
|
|
|
|
|
|
|
| |
effect of share-based awards |
|
0.4 |
|
|
|
0.7 |
|
|
|
0.4 |
|
|
|
1.0 |
|
|
| Weighted average common shares outstanding and |
|
|
|
|
|
|
|
|
| potential additional common shares outstanding |
|
|
|
|
|
|
|
|
| (denominator for diluted earnings per
share) |
|
318.9 |
|
|
|
325.4 |
|
|
|
318.7 |
|
|
|
332.7 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.61 |
|
|
$ |
0.90 |
|
|
| Diluted earnings per share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.61 |
|
|
$ |
0.90 |
|
|
| Whole Foods Market, Inc. |
|
| Consolidated Statements of Comprehensive Income
(unaudited) |
|
| (In millions) |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
12 weeks ended |
|
28 weeks ended |
|
| |
|
|
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net income |
$ |
99 |
|
|
$ |
142 |
|
$ |
194 |
|
|
$ |
299 |
|
| Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
| |
Foreign currency translation adjustments |
|
(2 |
) |
|
|
10 |
|
|
(3 |
) |
|
|
- |
|
| Other
comprehensive loss, net of tax |
|
(2 |
) |
|
|
10 |
|
|
(3 |
) |
|
|
- |
|
| Comprehensive income |
$ |
97 |
|
|
$ |
152 |
|
$ |
191 |
|
|
$ |
299 |
|
| Whole Foods Market, Inc. |
|
| Consolidated Balance Sheets
(unaudited) |
|
| (In millions) |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Assets |
April 9, 2017 |
|
September 25, 2016 |
|
| Current assets: |
|
|
|
|
| |
Cash and cash equivalents |
$ |
412 |
|
|
$ |
351 |
|
|
| |
Short-term investments - available-for-sale
securities |
|
476 |
|
|
|
379 |
|
|
| |
Restricted cash |
|
124 |
|
|
|
122 |
|
|
| |
Accounts receivable |
|
255 |
|
|
|
242 |
|
|
| |
Merchandise inventories |
|
508 |
|
|
|
517 |
|
|
| |
Prepaid expenses and other current assets |
|
119 |
|
|
|
167 |
|
|
| |
Deferred income taxes |
|
214 |
|
|
|
197 |
|
|
| |
|
Total current assets |
|
2,108 |
|
|
|
1,975 |
|
|
| Property and equipment, net of accumulated depreciation and
amortization |
|
3,469 |
|
|
|
3,442 |
|
|
| Goodwill |
|
710 |
|
|
|
710 |
|
|
| Intangible assets, net of accumulated amortization |
|
71 |
|
|
|
74 |
|
|
| Deferred income taxes |
|
114 |
|
|
|
100 |
|
|
| Other assets |
|
41 |
|
|
|
40 |
|
|
| |
Total assets |
$ |
6,513 |
|
|
$ |
6,341 |
|
|
| |
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
| |
Current installments of long-term debt and capital lease
obligations |
$ |
2 |
|
|
$ |
3 |
|
|
| |
Accounts payable |
|
313 |
|
|
|
307 |
|
|
| |
Accrued payroll, bonus and other benefits due team
members |
|
393 |
|
|
|
407 |
|
|
| |
Dividends payable |
|
45 |
|
|
|
43 |
|
|
| |
Other current liabilities |
|
584 |
|
|
|
581 |
|
|
| |
|
Total current liabilities |
|
1,337 |
|
|
|
1,341 |
|
|
| Long-term debt and capital lease obligations, less current
installments |
|
1,047 |
|
|
|
1,048 |
|
|
| Deferred lease liabilities |
|
665 |
|
|
|
640 |
|
|
| Other long-term liabilities |
|
105 |
|
|
|
88 |
|
|
| |
Total
liabilities |
|
3,154 |
|
|
|
3,117 |
|
|
| |
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
| |
|
|
|
|
|
|
| Shareholders’ equity: |
|
|
|
|
| Common stock, no par value, 1,200 shares
authorized; |
|
|
|
|
| |
377.0 shares issued; 318.8 and 318.3 shares
outstanding |
|
|
|
|
| |
at 2017 and 2016, respectively |
|
2,945 |
|
|
|
2,933 |
|
|
| Common stock in treasury, at cost, 58.1 and 58.7 shares
at 2017 and 2016, respectively |
|
(2,004 |
) |
|
|
(2,026 |
) |
|
| Accumulated other comprehensive loss |
|
(35 |
) |
|
|
(32 |
) |
|
| Retained earnings |
|
2,453 |
|
|
|
2,349 |
|
|
| |
Total
shareholders’ equity |
|
3,359 |
|
|
|
3,224 |
|
|
| |
Total liabilities and
shareholders’ equity |
$ |
6,513 |
|
|
$ |
6,341 |
|
|
| |
|
|
|
|
|
|
Whole Foods Market, Inc.
|
Consolidated Statements of Cash Flows
(unaudited)
|
(In millions)
|
| |
|
|
|
|
|
|
| |
|
|
|
28 weeks ended |
| |
|
|
|
April 9, 2017 |
|
April 10, 2016 |
| Cash flows from operating
activities |
|
|
|
|
|
|
| Net income |
|
|
|
$ |
194 |
|
|
$ |
299 |
|
| Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
| Depreciation and amortization |
|
|
|
305 |
|
|
|
259 |
|
| Share-based payment expense |
|
|
|
23 |
|
|
|
28 |
|
| LIFO expense |
|
|
|
3 |
|
|
|
4 |
|
| Deferred income tax benefit |
|
|
|
(31 |
) |
|
|
5 |
|
| Excess tax benefit related to exercise of team member
stock options |
|
|
|
- |
|
|
|
(1 |
) |
| Accretion of premium/discount on marketable
securities |
|
|
|
1 |
|
|
|
1 |
|
| Deferred lease liabilities |
|
|
|
34 |
|
|
|
18 |
|
| Other |
|
|
|
6 |
|
|
|
1 |
|
| Net change in current assets and liabilities: |
|
|
|
| Accounts receivable |
|
(11 |
) |
|
|
(12 |
) |
| Merchandise inventories |
|
6 |
|
|
|
(25 |
) |
| Prepaid expenses and other current assets |
|
54 |
|
|
|
(54 |
) |
| Accounts payable |
|
6 |
|
|
|
4 |
|
| Accrued payroll, bonus and other benefits due team
members |
|
(13 |
) |
|
|
(39 |
) |
| Other current liabilities |
|
30 |
|
|
|
76 |
|
| Net change in other long-term liabilities |
|
17 |
|
|
|
11 |
|
| Net cash
provided by operating activities |
|
|
|
624 |
|
|
|
575 |
|
| Cash flows from investing
activities |
|
|
|
|
|
|
| Development costs of new locations |
|
|
|
|
(227 |
) |
|
|
(197 |
) |
| Other property and equipment expenditures |
|
|
|
|
(149 |
) |
|
|
(141 |
) |
| Purchases of available-for-sale securities |
|
|
|
|
(356 |
) |
|
|
(176 |
) |
| Sales and maturities of available-for-sale securities |
|
|
|
|
258 |
|
|
|
350 |
|
| Payment for purchase of acquired entities, net of cash acquired |
|
|
|
|
- |
|
|
|
(11 |
) |
| Other investing activities |
|
|
|
|
(6 |
) |
|
|
(10 |
) |
| Net cash
used in investing activities |
|
|
(480 |
) |
|
|
(185 |
) |
| Cash flows from financing
activities |
|
|
|
|
|
|
| Purchases of treasury stock |
|
|
|
|
- |
|
|
|
(734 |
) |
| Common stock dividends paid |
|
|
|
|
(88 |
) |
|
|
(90 |
) |
| Issuance of common stock |
|
|
|
|
10 |
|
|
|
11 |
|
| Excess tax benefit related to exercise of team member stock
options |
|
|
|
|
- |
|
|
|
1 |
|
| Proceeds from long-term borrowings |
|
|
|
|
- |
|
|
|
999 |
|
| Proceeds from revolving line of credit |
|
|
|
|
- |
|
|
|
300 |
|
| Payments on long-term debt and capital lease obligations |
|
|
|
|
(2 |
) |
|
|
(305 |
) |
| Other financing activities |
|
(1 |
) |
|
|
(8 |
) |
| Net cash
provided by (used in) financing activities |
|
|
(81 |
) |
|
|
174 |
|
| Effect of
exchange rate changes on cash and cash equivalents |
|
|
- |
|
|
|
2 |
|
| Net change in cash, cash equivalents, and restricted cash |
|
|
|
|
63 |
|
|
|
566 |
|
| Cash, cash equivalents, and
restricted cash at beginning of period |
|
|
473 |
|
|
|
364 |
|
| Cash, cash equivalents, and
restricted cash at end of period |
|
$ |
536 |
|
|
$ |
930 |
|
| |
|
|
|
|
|
|
| Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
| Federal and state income taxes paid |
$ |
142 |
|
|
$ |
229 |
|
| Interest paid |
|
$ |
26 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
| Whole Foods Market, Inc. |
|
| Non-GAAP Financial Measures
(unaudited) |
|
| (In millions) |
|
| |
|
|
|
|
|
|
|
|
|
| In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, the Company provides information regarding Adjusted Diluted Earnings per
Share ("EPS"), Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA and Free Cash
Flow in the press release as additional information about its operating results. These measures are not in accordance
with, or an alternative to, GAAP. The Company’s management believes that these presentations provide useful information
to management, analysts and investors regarding certain additional financial and business trends relating to its results of
operations and financial condition. In addition, management uses these measures for reviewing the financial results of
the Company as well as a component of incentive compensation. |
| |
|
|
|
|
|
|
|
|
|
| The Company defines Adjusted Diluted EPS as net income plus charges
for store and facility closures and Mr. Robb's separation agreement divided by the weighted average shares outstanding and
potential additional common shares outstanding. The Company defines Adjusted EBITDA as EBITDA plus charges for Mr. Robb's
separation agreement and store and facility closures other than the related accelerated depreciation already included in
depreciation and amortization. The following is a tabular reconciliation of the non-GAAP financial measures Adjusted
Diluted EPS to GAAP Diluted EPS and Adjusted EBITDA to GAAP net income, which the Company believes to be the most directly
comparable GAAP financial measures. |
| |
|
|
|
|
|
|
|
|
|
| |
|
12 weeks ended |
|
28 weeks ended |
|
| Adjusted Diluted
Earnings per Share (EPS) |
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net income |
$ |
99 |
|
|
$ |
142 |
|
|
$ |
194 |
|
|
$ |
299 |
|
|
| Store and facility closures, net of tax |
|
18 |
|
|
|
- |
|
|
|
38 |
|
|
|
- |
|
|
| Mr. Robb's separation agreement,
net of tax |
|
- |
|
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
| Adjusted Net income |
$ |
117 |
|
|
$ |
142 |
|
|
$ |
240 |
|
|
$ |
299 |
|
|
| |
|
|
|
|
|
|
|
|
|
| Adjusted Diluted Earnings per Share |
$ |
0.37 |
|
|
$ |
0.44 |
|
|
$ |
0.75 |
|
|
$ |
0.90 |
|
|
| Weighted average shares outstanding |
|
318.9 |
|
|
|
325.4 |
|
|
|
318.7 |
|
|
|
332.7 |
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
12 weeks ended |
|
28 weeks ended |
|
| EBITDA and Adjusted
EBITDA |
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net income |
$ |
99 |
|
|
$ |
142 |
|
|
$ |
194 |
|
|
$ |
299 |
|
|
| Provision for income taxes |
|
63 |
|
|
|
93 |
|
|
|
124 |
|
|
|
185 |
|
|
| Interest expense |
|
11 |
|
|
|
11 |
|
|
|
26 |
|
|
|
18 |
|
|
| Investment and other income |
|
(2 |
) |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
(9 |
) |
|
| Operating income |
|
171 |
|
|
|
241 |
|
|
|
343 |
|
|
|
493 |
|
|
| Depreciation and amortization |
|
116 |
|
|
|
112 |
|
|
|
305 |
|
|
|
259 |
|
|
| EBITDA |
|
287 |
|
|
|
353 |
|
|
|
648 |
|
|
|
752 |
|
|
| Mr. Robb's separation agreement |
|
- |
|
|
|
- |
|
|
|
13 |
|
|
|
- |
|
|
| Store and facility closures, excluding accelerated depreciation |
|
29 |
|
|
|
- |
|
|
|
29 |
|
|
|
- |
|
|
| Adjusted
EBITDA |
$ |
316 |
|
|
$ |
353 |
|
|
$ |
690 |
|
|
$ |
752 |
|
|
| |
|
|
|
|
|
|
|
|
|
| The Company defines Free Cash Flow as net cash provided by operating
activities less capital expenditures. The following is a tabular reconciliation of the Free Cash Flow non-GAAP financial
measure. |
| |
|
|
|
|
|
|
|
|
|
| |
|
12 weeks ended |
|
28 weeks ended |
|
| Free Cash Flow |
April 9, 2017 |
|
April 10, 2016 |
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net cash provided by operating activities |
|
$ |
340 |
|
|
$ |
343 |
|
|
$ |
624 |
|
|
$ |
575 |
|
|
| Development costs of new locations |
|
|
(77 |
) |
|
|
(106 |
) |
|
|
(227 |
) |
|
|
(197 |
) |
|
| Other property and equipment
expenditures |
|
|
(54 |
) |
|
|
(53 |
) |
|
|
(149 |
) |
|
|
(141 |
) |
|
| Free Cash Flow |
$ |
209 |
|
|
$ |
184 |
|
|
$ |
248 |
|
|
$ |
237 |
|
|
| |
|
|
|
|
|
|
|
|
|
| Whole Foods Market, Inc. |
|
| Non-GAAP Financial Measures
(unaudited) |
|
| (In millions) |
|
| |
|
|
|
|
|
|
|
|
|
| In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, the Company provides information regarding Return on Invested Capital
(“ROIC”) and Adjusted ROIC as additional information about its operating results. These measures are not in accordance
with, or an alternative to, GAAP. The Company’s management believes this presentation provides useful information to
management, analysts and investors regarding certain additional financial and business trends relating to its results of
operations and financial condition. In addition, management uses this measure for reviewing the financial results of the
Company as well as a component of incentive compensation. The Company defines ROIC as ROIC earnings divided by average
invested capital. ROIC earnings and adjustments to ROIC earnings are defined in the following tabular
reconciliation. Invested capital reflects a trailing four-quarter average. |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
52 weeks ended |
|
| ROIC |
|
|
|
|
April 9, 2017 |
|
April 10, 2016 |
|
| Net income |
|
|
|
|
$ |
402 |
|
|
$ |
509 |
|
|
| Interest expense, net of tax |
|
|
|
|
|
29 |
|
|
|
11 |
|
|
| ROIC
earnings |
|
|
|
|
|
431 |
|
|
|
520 |
|
|
| Total rent expense, net of tax1 |
|
|
|
|
|
295 |
|
|
|
273 |
|
|
| Estimated depreciation on
capitalized operating leases, net of tax2 |
|
|
|
|
|
(197 |
) |
|
|
(182 |
) |
|
| ROIC earnings, including the
effect of capitalized operating leases |
|
|
|
|
$ |
529 |
|
|
$ |
611 |
|
|
| |
|
|
|
|
|
|
|
|
|
| Average working capital, excluding current portion of long-term
debt |
|
|
|
|
$ |
692 |
|
|
$ |
584 |
|
|
| Average property and equipment, net |
|
|
|
|
|
3,409 |
|
|
|
3,177 |
|
|
| Average other assets |
|
|
|
|
|
950 |
|
|
|
1,048 |
|
|
| Average other liabilities |
|
|
|
|
|
(731 |
) |
|
|
(666 |
) |
|
| Average invested capital |
|
|
|
|
|
4,320 |
|
|
|
4,143 |
|
|
| Average estimated asset base of
capitalized operating leases3 |
|
|
|
|
|
3,882 |
|
|
|
3,553 |
|
|
| Average invested capital,
including the effect of capitalized operating leases |
|
|
|
|
$ |
8,202 |
|
|
$ |
7,696 |
|
|
| |
|
|
|
|
|
|
|
|
|
| ROIC |
|
|
|
|
|
10.0 |
% |
|
|
12.6 |
% |
|
| ROIC, including the effect of capitalized of
operating leases |
|
|
|
|
|
6.5 |
% |
|
|
7.9 |
% |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Adjusted ROIC |
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
$ |
402 |
|
|
$ |
509 |
|
|
| Interest expense, net of tax |
|
|
|
|
|
29 |
|
|
|
11 |
|
|
| Adjustments, net of tax4 |
|
|
|
|
|
|
50 |
|
|
|
47 |
|
|
| Adjusted
ROIC earnings |
|
|
|
|
|
481 |
|
|
|
567 |
|
|
| Total rent expense, net of tax1 |
|
|
|
|
|
295 |
|
|
|
273 |
|
|
| Estimated depreciation on
capitalized operating leases, net of tax2 |
|
|
|
|
|
(197 |
) |
|
|
(182 |
) |
|
| Adjusted ROIC earnings, including
the effect of capitalized operating leases |
|
|
|
$ |
579 |
|
|
$ |
658 |
|
|
| |
|
|
|
|
|
|
|
|
|
| Average working capital, excluding current portion of long-term
debt |
|
|
|
|
$ |
692 |
|
|
$ |
584 |
|
|
| Average property and equipment, net |
|
|
|
|
|
3,409 |
|
|
|
3,177 |
|
|
| Average other assets |
|
|
|
|
|
950 |
|
|
|
1,048 |
|
|
| Average other liabilities |
|
|
|
|
|
(731 |
) |
|
|
(666 |
) |
|
| Average invested capital |
|
|
|
|
|
4,320 |
|
|
|
4,143 |
|
|
| Average estimated asset base of
capitalized operating leases3 |
|
|
|
|
|
3,882 |
|
|
|
3,553 |
|
|
| Average invested capital,
including the effect of capitalized operating leases |
|
|
|
|
$ |
8,202 |
|
|
$ |
7,696 |
|
|
| |
|
|
|
|
|
|
|
|
|
| Adjusted ROIC |
|
|
|
|
|
11.1 |
% |
|
|
13.7 |
% |
|
| Adjusted ROIC, including the effect of
capitalized operating leases |
|
|
|
|
|
7.1 |
% |
|
|
8.6 |
% |
|
| |
|
|
|
|
|
|
|
|
|
1 Total rent includes minimum base rent of all
tendered leases
|
|
2 Estimated depreciation equals
two-thirds of total rent expense
|
|
3 Estimated asset base equals
eight times total rent expense
|
|
| 4 Adjustments include charges
related to Mr. Robb's separation agreement store and facility closures and asset impairments, as well as the Q4 2015
restructuring charge |
| |
|
|
|
|
|
|
|
|
|
Investor Relations Contact: Cindy McCann VP of Investor Relations 512.542.0204 Media Contact: Brooke Buchanan Brooke.Buchanan@wholefoods.com 512.542.0751
