http://www.morningstar.com/earnings/25433504-wfmi-wfmi-q2-2011.aspx

WFMI WFMI
Q2 2011 Earnings Call Transcript

Transcript Call Date 05/04/2011

Operator: Good day and welcome to Whole Foods Market Second Quarter Earnings 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.

It is now pleasure to hand the call over to Cindy McCann. Please go ahead.

Cindy McCann - Global VP, IR: Good afternoon. Thank you for joining us for the Whole Foods Market second quarter earnings conference call. On the call up today are John Mackey and Walter Robb, Co-Chief Executive Officers; A.C. Gallo, President and Chief Operating Officer; Glenda Flanagan, Executive Vice President and Chief Financial Officer; and Jim Sud, Executive Vice President of Growth and Development.

As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause the Company's actual results to differ materially from the expectations and assumptions discussed today, due to a variety of factors that affect the Company including the risks specified in the Company's most recently filed Form 10-Q and 10-K. Please note our press release and scripted remarks are available on our website.

I will now turn the call over to, John Mackey.

John Mackey - Co-CEO: Thank you, Cindy. Good afternoon, everyone. We assume you've read our press release, so we use this time to focus on highlights from the quarter and our updated guidance for the year. We're very proud of our results with the strongest we've reported in the past five years we've produced.

Average weekly sales per store of $644,000, translating to $888 in sales per square foot, 9.7% store contribution; 6% operating margin; 8.9% EBITDA margin; 29% increase in diluted earnings per share to $0.51; and the 38% net operating profit after-tax return on invested capital for all stores.

Our solid execution and capital discipline is generating consistent cash flow. Over the last four quarters, we have produced $645 million in cash flow from operations and received $166 million in proceeds from stock option exercises. We've used our cash to invest $279 million in new and existing stores, pay off $700 million in long-term debt, and return $35 million in two quarterly dividends to our shareholders. With our long-term debt now fully repaid, we are considering other uses for our growing cash balance, including increasing the investment in our new and existing stores, raising our dividend and repurchasing stock.

While we're very proud of our results and healthy balance sheet, the biggest news of the quarter is that we were able to successfully comp the comp. Despite a 520 basis point tougher year ago comparison in Q2 compared to Q1, we are reporting our sixth consecutive quarter of accelerating two-year identical store sales growth. Identical store sales increased 8.3% in the second quarter or 16% on a two-year stacked basis, excluding a negative 50 basis point impact from the Easter shift.

We believe our efforts around value and differentiation continue to gain traction as evidenced by the strong six percent increase in our transaction count in identical stores. We believe this slight decline from the 7% increase we saw in Q1 was due to the much tougher year ago comparison.

Read our Earnings Call Transcript disclaimer.
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