Whole Foods Market (WFM) Tops Q1 EPS by 6c, Offers Guidance

Whole Foods Market (NASDAQ: WFM) reported Q1 EPS of $0.46, $0.06 better than the analyst estimate of $0.40. Revenue for the quarter came in at $4.83 billion versus the consensus estimate of $4.81 billion.

Comparable store sales on a constant currency basis decreased 1.8%.

GUIDANCE:

Whole Foods Market sees Q2 2016 EPS of $1.53, versus the consensus of $1.53.

The Company remains focused on the metrics it believes are key to the long-term health of its business and is targeting:

• Sales growth of 3% to 5%
• Approximately 30 new stores, including three 365 stores and two to three relocations
• Square footage growth of 7% or greater
• EBITDA margin of approximately 8.5%
• Capital expenditures of 5% of sales
• ROIC greater than 13.5%

The Company’s results are highly dependent on comps, which have been particularly difficult to predict in this competitive landscape. The Company is hopeful that comps will improve over the course of the year as comparisons get easier and sales-building initiatives gain traction; however, there could be some offsetting impact from a ramp up in price investments and promotions throughout the year. The 3% to 5% sales outlook for the year reflects comps of -2% to 0%.

Based on year-to-date results, the Company now expects a decline in operating margin for the fiscal year of up to 70 basis points from the 6.1% reported last year excluding fourth quarter charges. Reflecting increased value efforts as the year progresses, the year-over-year decline in gross margin, excluding LIFO, in Q2 through Q4 is expected to be greater than the 86 basis point decline in Q1. The Company expects year-over-year SG&A leverage to increase sequentially over the next three quarters reflecting the positive impact of cost-saving initiatives net of higher depreciation and other costs. For the remainder of the year, interest expense is expected to be approximately $38 million, and the effective tax rate is expected to be 39.0%. Excluding $0.02 to $0.05 per diluted share in estimated net accretion related to debt-financed buybacks, the Company expects diluted earnings per share for the fiscal year of $1.53 or greater, implying $1.07 or greater for the remainder of the year.

The Company’s 365 store openings are expected as follows: Silver Lake, CA in late May; Lake Oswego, OR in July; and Bellevue, WA in August.

For earnings history and earnings-related data on Whole Foods Market (WFM) click here.

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