WHOLE FOODS POSTS 22% SALES GROWTH

AUSTIN, Texas - Sales at Whole Foods Market here continued their meteoric rise in the retailer's fiscal first quarter.Overall sales increased by 22%, comparable-store sales climbed 13%, average sales per square foot exceeded $900 for the first time, and with newer and larger stores on the way, "I don't see any reason why we couldn't get 50% or 60% above that [sales per-square-foot figure] eventually,"

AUSTIN, Texas - Sales at Whole Foods Market here continued their meteoric rise in the retailer's fiscal first quarter.

Overall sales increased by 22%, comparable-store sales climbed 13%, average sales per square foot exceeded $900 for the first time, and with newer and larger stores on the way, "I don't see any reason why we couldn't get 50% or 60% above that [sales per-square-foot figure] eventually," John Mackey, Whole Foods' chief executive officer, told analysts during a conference call last week.

While financial analysts remained sanguine about the company's lofty stock valuation, and some noted that a dip in margins resulted in earnings coming in a penny under consensus estimates, they also marveled at robust sales gains unique among U.S. food retailers.

"Their sales were outstanding. Their business is continuing to thrive," Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., told SN, adding that Whole Foods' reported earnings of 40 cents per share matched his expectations. "This is the ninth quarter in a row with double-digit same-store sales. I have never seen such a thing. It's clearly the healthiest franchise out there by far."

Mackey said Whole Foods signed leases for 10 new properties during the quarter, which ended Jan. 16, including an 80,000-square-foot relocation of its Chicago Lincoln Park store, and 60,000-square-foot stores in Honolulu, Philadelphia and Richmond, Va. The retailer opened five new stores during the quarter, and plans two openings during the current quarter, as well as re-openings of two New Orleans-area stores either closed or operating at lower capacity due to hurricane damage.

Mackey said that Whole Foods might find opportunities to expand its development pipeline through stores expected to come available in the aftermath of the Albertsons breakup. But he said the chain would be selective in the sites it may acquire and would pass on deals offering any real estate the company did not want.

"I do think there will be conventional [supermarkets] available to us, and we're looking at several deals around the United States right now," Mackey said. "We certainly want to be opportunistic and grab the sites we can. Oftentimes, we've got to pass on good sites [because] we avoid taking bad ones that are a part of the deal."

A.C. Gallo, co-president and chief marketing officer, said larger stores allow greater selection and encourage larger basket sizes, because they capture consumers looking for both ingredients to make foods at home as well as those in search of prepared meals. Whole Foods attributed 6% of its comp growth to larger basket sizes and 7% to additional transactions.

"We are appealing more to average American middle-class consumers than we might have five or six years ago," Mackey said.

For the quarter, Whole Foods reported net income of $58.3 million on sales of $1.7 billion. Earnings increased by 26%, and gross profit as a percent of sales decreased by seven basis points to 34.5% of sales, which the company said was due to normal seasonal fluctuation.

1ST-QUARTER RESULTS

Qtr Ended: 1/15/06; 1/16/05

Sales: $1.67 billion; $1.37 billion

Change: +22%

Comp-store: +13%

Net Income: $58.3 million; $46.2 million

Change: +26%

Inc/Share: 40 cents; 34 cents