NEW STRATEGY AT WILD OATS: MORE ADS, LOWER PRICES

BOULDER, Colo. -- Wild Oats Markets here said it is testing a strategic initiative to build sales through increased advertising and lower prices in a single, 12-store market in Colorado, and if the initiative succeeds it could roll it out nationally."Our biggest hurdle in the second quarter has been driving top-line sales," Perry Odak, Wild Oats president and chief executive officer, told equity analysts

BOULDER, Colo. -- Wild Oats Markets here said it is testing a strategic initiative to build sales through increased advertising and lower prices in a single, 12-store market in Colorado, and if the initiative succeeds it could roll it out nationally.

"Our biggest hurdle in the second quarter has been driving top-line sales," Perry Odak, Wild Oats president and chief executive officer, told equity analysts during a conference call following the release of the company's results for the second quarter and first half ended June 30.

Odak, who was hired in March to turn the troubled company around, admitted he was under pressure to produce quick results. "I sure would have liked to run this test sometime other than July and August, the dog days of retailing," he said.

In its first month, the initiative has produced "increases in customer count, but the basket-size has been relatively flat," Odak said.

Other moves Odak discussed in the call included:

Pushing back all store openings originally scheduled for 2001 to 2002. Odak said the company currently has five stores under construction.

Closing or selling eight stores. Odak declined to specify which stores the company was looking to dispose.

Finalizing a new agreement with lenders, necessary because the company has not been in compliance with certain covenants under its credit facility as a result of restructuring and asset impairment charges incurred during fiscal 2000. Odak said the company should have a new agreement in place within two months.

Developing a store prototype that "may not be as big" as current Wild Oats units. The company said remodelings currently in process will not involve enlarging stores.

Odak came to Wild Oats from a previous turnaround assignment as president and CEO of Ben & Jerry's Homemade, South Burlington, Vt., where he succeeded the ice cream company's countercultural founders.

"There are a lot of analogies" between the two companies, he noted. "Wild Oats was a classic entrepreneurial company. We needed people who understood control and discipline.

"We brought in people from conventional supermarket and retail companies because we didn't need to reinvent skill sets that already existed. Now, it's coming together rather nicely."

As for the financial results, Odak noted that some are positive, particularly a 3.9% increase in comparable-store sales for the quarter.

He also noted several negatives. "I am not pleased with the decline in gross profit margins," he said, which decreased to 28.9% in the quarter from 31.2% in the same period last year.

He attributed the decline to increases in inventory reserves for slow-moving goods, lower margins on some products and higher utility costs.

For the half, sales increased 5.9% to $448.9 million and comps were up 2.3%, but the company posted a net loss of $38.2 million compared with a net loss of $3.5 million in the previous year's first half. The loss per share was $1.58, compared with a loss of 15 cents in first-half 2000.

For the quarter, sales rose 7.8% to $229.4 million, but the company's net loss grew to $38.1 million, up from $8.8 million in last year's comparable period. The loss per share was $1.55, compared with 38 cents in second quarter 2000.