Whole Foods Market (WFM) Tops Q2 EPS by 3c, Updates Guidance

Whole Foods Market (NASDAQ: WFM) reported Q2 EPS of $0.44, $0.03 better than the analyst estimate of $0.41. Revenue for the quarter came in at $3.7 billion versus the consensus estimate of $3.74 billion.

Comps declined 3%.

Updated Outlook for Fiscal Year 2016

• Sales growth of up to 3%, reflecting comps of up to -2%
• 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 now expects to be at or below the low end of its prior sales and earnings per share ranges, reflecting recent sales trends and additional investments in marketing and technology in the second half of the year. While the Company is hopeful that comps will improve over the course of the year as comparisons get easier and sales-building initiatives gain traction, there will be some ongoing offsetting impact from a ramp up in price investments and promotions throughout the year. Including $0.02 per share in net accretion from year-to-date stock buybacks, the Company expects diluted earnings per share for the fiscal year of up to $1.53, implying up to $0.63 for the remainder of the year. The Company has $603 million in remaining buyback authority and is committed to repurchasing stock on an opportunistic basis.

The Company expects a decline in operating margin for the fiscal year of approximately 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 Q3 and Q4 is expected to be greater than the 98 basis point decline in Q2. Given the lower sales projections, the Company now expect SG&A leverage to be more in line with the 19 basis points produced year to date. This reflects the positive impact of cost savings initiatives, net of higher depreciation and other costs, including the additional marketing and technology investments approved for later in the year. For the remainder of the year, interest expense is expected to be approximately $25 million, and the effective tax rate is expected to be 39.0%.

- See more at: http://investor.wholefoodsmarket.com/investors/press-releases/press-release-details/2016/Whole-Foods-Market-Reports-Second-Quarter-Results-542016/default.aspx#sthash.0Pr737gf.dpuf

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

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