http://www.morningstar.com/earnings/41444233-whole-foods-market-inc-wfm-q3-2012.aspx

Whole Foods Market Inc WFM
Q3 2012 Earnings Call Transcript

Transcript Call Date 07/25/2012

Operator: Good day everyone and welcome to today’s Whole Foods Market Third Quarter Earnings Program. At this time, all participants are in a listen-only mode, but you will have the opportunity to ask questions during the Q&A session.

It is now my pleasure to turn the conference over to Cindy McCann, VP of Investor Relations. Please go ahead.

Cindy McCann - Global VP, Investor Relations: Good afternoon and thank you for joining us. On today's call are John Mackey and Walter Robb, Co-Chief Executive Officers; A.C. Gallo, President; Glenda Flanagan, Executive Vice President and Chief Financial Officer; and Jim Sud, Executive Vice President of Growth and Development; and David Lannon and Ken Meyer, Executive Vice Presidents of Operations.

As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in our Company's most recently filed Form 10-Q and 10-K. Please note, our press release and scripted remarks are available on our website. We assume you have read our press release, so we will use this time to focus on highlights from the quarter and our future outlook.

I will now turn the call over to Walter Robb.

Walter Robb - Co-CEO: Thank you, Cindy. Good afternoon, everybody. Our Q3 results reflect another quarter of strong sales momentum and outstanding execution. We produced 27% EPS growth on 14% sales growth delivering significant year-over-year improvement including the 62 basis point increase in gross margin to 36%, a 57 basis point decrease in direct store expenses to 25.3% of sales, a 119 basis point improvement in store contribution to 10.7% of sales, a 104 basis point increase in operating margin to 6.9%, 94 basis point improvement in EBITDA margin to 9.6% and 192 basis point improvement in return on invested capital to 15.2%.

Our solid performance, capital discipline and increasing stock price generated close to $300 million of cash during the quarter through the combination of $211 million in cash flow from operations and 88 million in proceeds from team member stock option exercises.

We invested $13 million in new and existing stores, repurchased 25 million of common stock and return 25 million in quarterly dividends to our shareholders. During the quarter our total cash and investments increased $154 million to $1.5 billion.

Turning back to sales, given the continued moderation in inflation along with some sluggish economic datapoints we were very pleased to produce our second consecutive quarter of 24.5% three-year stacked ident or three years of 8% plus increases. Excluding the Easter shift our comps increase 8.9% and our idents increased 8.6%. Transaction count increased 7% with broad based sales momentum across regions, departments and store age classes.

On a year-over-year basis, our customers have continued to shift their purchases for organic products and several discretionary categories. We also continue to see meaningful increases in $50 plus sized baskets.

Read our Earnings Call Transcript disclaimer.
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