WILD OATS COMPS SLIDE IN FIRST QUARTER

BOULDER, Colo. -- Wild Oats Markets here said last week store-level disruptions caused by inventory reductions and a transition to a new private-label program resulted in a decline in comparable-store sales for the first quarter ended March 29.

Overall sales rose 1.3% to $236 million for the 13-week quarter -- driven by four new-store openings, the company said -- and net income rose 115.6% to $1.4 million, due to an increase of more than 100 basis points in gross margins and continued control of store-level expenses, the company pointed out.

However, comps fell 0.9%, compared with a gain of 7.3% in last year's first quarter, which the company attributed to a number of factors, including the removal of approximately 30,000 slow-moving or inactive items since last year's fourth quarter; an ongoing review of private-label products, which resulted in some out-of-stocks; severe winter weather in the East, Texas and Colorado that impacted 30% of its store base; the shift of Easter to the second quarter; remodeling and reset activities; and the slowdown in the economy, with high unemployment levels affecting 20% of its base.

"While we have maintained our core loyal shoppers, we have fewer visits from peripheral shoppers -- people new to the segment or who are more sensitive to changes in economic conditions," Perry Odak, chief executive officer, told analysts during a conference call. "We are currently rolling out new advertising programs in key markets to address these peripheral shoppers."

Odak said Wild Oats anticipates comps in the 4% to 7% range through 2005, with results this year likely to be at the low end of that range, "though our expectation is that comps should improve throughout the year."

Based on the company's new prototype store in Long Beach, Calif., that opened a year ago, Ed Dunlap, chief financial officer, said the company has revised upward its estimates of new-store results. "We feel $500 per square foot is quite achievable, and we also expect higher customer counts and larger basket sizes than we originally projected," he explained.

At the chain's annual meeting earlier this month, Dunlap said the 26,000-square-foot Long Beach store had achieved record opening sales, "and is delivering gains of 20% to 50% vs. existing stores." He said Wild Oats is using elements from that prototype in its store-remodeling program.

Wild Oats opened four new stores during the first quarter, and anticipates two more in the third quarter and three or four in the fourth, although one store may be delayed, Dunlap told the analysts.

He said the company completed four remodelings in the first quarter, including the reopening of a store in Albuquerque, N.M., that has seen very favorable results. However, he said results have moderated "in the last few weeks, though that store is still running 25% higher than it did prior to the remodeling."

Dunlap told shareholders at the company's annual meeting a week earlier that average weekly sales at the Albuquerque store were up 24% during the first four weeks after it reopened. He also said Wild Oats anticipates 20 remodelings or resets this year and 18 more next year.