Q2 2010 Earnings Call Transcript

Transcript Call Date 05/12/2010

Operator: Good day everyone and welcome to the Whole Foods Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. I will be standing by if you should need any assistance.

And it is now my pleasure to turn the call over to Mr. John Mackey. Please go ahead.

John Mackey - Co-CEO: Good afternoon. Joining me today are Walter Robb, Co-CEO; A.C. Gallo, President and COO; Glenda Chamberlain, Executive Vice President and Chief Financial Officer; Jim Sud, Executive Vice President of Growth and Development; and Cindy McCann, Vice President of Investor Relations. Let me start off by congratulating Walter and A.C. on their well-deserved promotions.

Now for the legalities. The discussion we are having will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and these statements involve risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. These risks and uncertainties include those outlined in today’s call, as well as any other risks identified from time to time in the Company’s public statements and reports filed with the SEC.

Please note our press release is now available on our website along with the scripted portion of this call.

We are very pleased to report our second quarter results, which exceeded our expectations on the top and bottom line and are the best we have reported in several years. Average weekly sales per store for all stores increased 9% to $600,000, translating to sales per square foot of $838.

Our strong sales are driving stronger bottom line results, allowing us to better leverage certain fixed costs such as occupancy and depreciation, while maintaining our expense and inventory disciplines.

On the 13% increase in sales, we produced 191 basis point improvement in operating margin to 5.7% of sales, a 40% increase in EBITDA to $182 million, 102% increase in diluted earnings per share to $0.39, cash flow from operations of $182 million, and free cash flow of $117 million.

These results included a $3.2 million gain on the sale of a non-operating property in the current year and asset impairment charges of $13.1 million last year.

We have successfully emerged from this recession with better capital disciplines and a healthier balance sheet.

Given our total cash and investments of $726 million at the end of the quarter, we subsequently repaid the floating $210 million portion of our $700 million term loan.

As the economy and consumer confidence improves, we are gaining back customers at a faster rate than our competitors. Our two-year stacked identical store sales increased 1.9%, our first positive two-year result since Q1 of 2009.

Our strong sales results were broad-based across most regions, age of stores, and store teams. Our value work in perishables clearly has resonated with our customers as evidenced by our perishable comps showing strong rebounds year-over-year and outpacing our store average.

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