Whole Foods Market, Inc. (NASDAQ:WFM) today reported results for
the 12-week fourth quarter ended September 25, 2016. For
the quarter, total sales increased to a record $3.5 billion.
Comparable store sales decreased 2.6%. Net income was $88
million, or 2.5% of sales, and diluted earnings per share were
$0.28. Earnings before interest, taxes, depreciation and
amortization (“EBITDA”) were $276 million, or 7.9% of sales, and
return on invested capital was 13%. Please refer to the
reconciliation of GAAP measures to non-GAAP measures at the end of
this release.
During the quarter, the Company produced $352
million in cash flow from operations, invested $195 million in
capital expenditures, returned $44 million in quarterly dividends
to shareholders, and repurchased $15 million or 0.5 million shares
of common stock. The Company ended the quarter with $1.1
billion of total debt and $1.2 billion of total available
capital.
“In a year that presented many headwinds for
food retailers, we made measurable progress on
positioning our company for continued success
while producing industry-leading sales per gross square foot
and healthy returns on invested capital,” said John Mackey,
co-founder and co-chief executive officer of Whole Foods
Market. “Through our strong balance sheet and robust cash
flow, we self-funded our new store development and technology
investments and, in keeping with our capital allocation strategy,
returned more than $1.1 billion to our shareholders through
dividends and share repurchases.”
“Food retailing is evolving at an incredibly
fast pace, and consumers have many more options for how and where
they buy their food than ever before. At the same time, the market
opportunity is expanding as the consciousness about fresh, healthy
foods continues to awaken,” said Walter Robb, co-chief executive
officer of Whole Foods Market. “Our company mission and commitment
to transparency are more relevant and timely than ever, and we will
keep innovating and creating environments where people can connect
and find a sense of community - in our stores and in the digital
world.”
The following table provides information on the
Company’s comparable store sales trends for the fourth quarter and
for the first five weeks of the 16-week first quarter.
Results for the most recent five weeks may not be indicative of
results for the full quarter.
|
Comps |
|
Change inTransactions |
|
Change inBasket Size |
|
Q4 ended September 25,
2016 |
(2.6 |
)% |
|
(4.2 |
)% |
|
1.6 |
%* |
|
Q1 through October 30,
2016 |
(1.6 |
)% |
|
|
|
|
|
*Reflects a 160 basis point increase in items per transaction,
with no change in average price per item
LIFO credits totaled $9 million versus $2
million last year, a positive impact of 19 basis points year over
year. Excluding LIFO, gross margin declined 53 basis points
to 33.9% driven by increases in cost of goods sold, primarily
reflecting the Company’s value efforts, and occupancy costs as a
percentage of sales.
Excluding $80 million of asset impairment and
restructuring charges in the prior year, SG&A increased five
basis points to 29.1% of sales. A 68 basis point improvement
in wages was more than offset by higher marketing, depreciation,
healthcare and technology expenses as a percentage of sales.
Fiscal Year ResultsFor the 52
weeks ended September 25, 2016, total sales increased 2.2% to
a record $15.7 billion. Comparable store sales decreased
2.5%. Average weekly sales per store were $682,000,
translating to sales per gross square foot of approximately
$915. Net income was $507 million, or 3.2% of sales, diluted
earnings per share were $1.55, and EBITDA was $1.4 billion, or 8.6%
of sales.
Fiscal year 2016 comparable store sales growth
and ROIC by age class are presented in the following table.
|
|
Comps |
|
ROIC* |
|
# of Stores |
|
% of SquareFootage |
|
Average Age(s.f. weighted) |
> 11 years |
|
(3.3 |
)% |
|
97 |
% |
|
194 |
|
39 |
% |
|
18
years |
5 to 11 years |
|
(3.1 |
)% |
|
54 |
% |
|
105 |
|
31 |
% |
|
8
years |
< 5
years |
|
0.5 |
% |
|
14 |
% |
|
128 |
|
30 |
% |
|
3 years |
All comparable
stores |
|
(2.5 |
)% |
|
46 |
% |
|
427 |
|
100 |
% |
|
10
years |
*Defined as store-level income after taxes
divided by average invested capital; does not include any as-if
effect of capitalizing operating leases.
For the fiscal year, the Company produced $1.1
billion in cash flow from operations and invested $716 million in
capital expenditures, resulting in $400 million of free cash
flow. In addition, the Company returned $177 million in
quarterly dividends to shareholders, and repurchased $944 million
or 31.6 million shares of common stock. The Company currently
has $443 million remaining in repurchase authority.
The Board of Directors today declared an
increase in the Company’s quarterly dividend to $0.14 per share
from $0.135 per share, representing an annual return to
shareholders of approximately $179 million. The next dividend
is payable on January 24, 2017 to shareholders of record as of
January 13, 2017.
Progress on Strategic
Initiatives:
- More than half way towards two-year $300 million expense
reduction goal
- Successful launch of new value format, 365 by Whole Foods
Market™
- Sales of over $5 billion in Exclusive Brands, prepared foods
and bakery
- Enhanced Whole Foods Market app, including digital coupons and
sales flyer
- Pilot of new Rewards program in the Dallas/Fort Worth area
- Over 13 million followers on social media and first grocer to
utilize chatbot technology
- Instacart ordering now available through the Whole Foods Market
website, offering fresh grocery delivery to more homes in the U.S.
than any other food retailer
- New unified point-of-sale system, including EMV
technology, across all of our U.S. stores
Growth and DevelopmentIn the
fourth quarter, the Company opened five stores, including two 365
by Whole Foods Market stores and one relocation. So far in
the first quarter, the Company has opened nine Whole Foods Market
stores, including one relocation, expanding into five new
markets. Five additional stores, including one relocation,
are expected to open over the remainder of the first quarter.
The fiscal year 2017 store opening schedule is front-end loaded,
with up to 22 stores opening in the first half of the year.
The Company recently signed five new leases,
including one relocation, and terminated two leases for stores in
development. The Whole Foods Market leases average 49,000
square feet and are located in Long Beach, CA and Denver, CO.
The 365 leases average 28,000 square feet and are located in
Redlands, CA; South Lake Tahoe, CA; and Fairfax, VA.
The following table provides additional
information about the Company’s new store openings and leases in
development for Whole Foods Market and 365 stores scheduled to open
through fiscal year 2021. To be approved, new stores must
generally meet an internal Economic Value Added (“EVA®”) hurdle
return of cumulatively positive EVA in five years or less.
While the Company’s weighted average cost of capital is currently
under 6%, the Company continues to use a more conservative 8% to
calculate projected new store returns.
|
|
|
|
FY17
YTD |
|
|
Current Leases Signed: |
New Store
Information |
|
FY16 |
|
|
Five Weeks |
|
|
WFM |
|
365 |
|
Total |
|
Number of stores
(including relocations) |
|
28 |
|
|
9 |
|
|
79 |
|
19 |
|
98 |
|
Relocations |
|
3 |
|
|
1 |
|
|
18 |
|
0 |
|
18 |
|
Percentage in new
markets |
|
21 |
% |
|
56 |
% |
|
11 |
% |
32 |
% |
15 |
% |
Total square footage |
|
1,190,000 |
|
|
391,000 |
|
|
3,585,000 |
|
551,000 |
|
4,136,000 |
|
Fiscal Year 2017 OutlookThe
Company remains focused on the metrics it believes are key to the
long-term health of its business and is targeting:
- Sales growth of 2.5% to 4.5%
- Comps of -2% to 0%
- Ending square footage growth of approximately 6%, reflecting
approximately 30 new stores, including up to six relocations and
four 365 stores
- Diluted EPS of $1.42 or greater, excluding any potential share
repurchases
- EBITDA margin of approximately 8.2%
- Capital expenditures of 4% of sales
- ROIC of 11% or greater
The Company has seen stability in comps over the last two
quarters and an improvement in trends quarter to date for both
traffic and basket size. The Company is encouraged that its
value and marketing efforts appear to be gaining traction with
customers and believes it will see momentum as its sales-building
initiatives are rolled out throughout the year. The
competitive landscape is very dynamic, however, and it is uncertain
how long the deflationary environment will continue. The high
end of the comp range reflects a -2.5% two-year comp, slightly
better than the -2.8% in Q4, while the low end reflects the
possibility that two-year trends could get marginally worse before
they get better, as the Company has seen quarter to date.
The Company plans to further reduce its cost
structure this year but expects these savings to be more than
offset by investments to drive traffic and sales, as well as higher
occupancy, depreciation and other costs. Therefore, the
Company expects a decline in operating margin of up to 60 basis
points for the year, with greater declines in the first half
primarily related to higher year-over-year pre-opening in the first
quarter and marketing expense in the first and second
quarters. The earnings per share outlook of $1.42 or greater
excludes potential buybacks and reflects a 39% tax rate for the
fiscal year.
In a separate release today, the Company announced certain
structure and leadership changes. In the first quarter of fiscal
year 2017, the Company expects to incur a charge of approximately
$13 million associated with Mr. Robb’s separation agreement. The
estimated $0.03 impact of this charge is not reflected in fiscal
year 2017 guidance.
SeasonalityEaster will fall in
the third quarter of fiscal year 2017 versus the second quarter of
fiscal year 2016, negatively impacting comparable store sales
growth in the second quarter and positively impacting comparable
store sales growth in the third quarter. Historically, the
impact has been approximately 50 basis points. The Company
notes that average weekly sales and gross profit as a percentage of
sales are typically highest in the second and third fiscal
quarters, and lowest in the fourth fiscal quarter due to seasonally
slower sales during the summer months. Gross profit as a
percentage of sales is also lower in the first fiscal quarter due
to the product mix of holiday sales.
About Whole Foods MarketFounded
in 1978 in Austin, Texas, Whole Foods Market is the leading natural
and organic foods supermarket, the first national “Certified
Organic” grocer, and uniquely positioned as America’s Healthiest
Grocery Store™. In fiscal year 2016, the Company had sales of
approximately $16 billion and currently has 464 stores in the
United States, Canada, and the United Kingdom. Whole Foods
Market employs approximately 87,000 team members and has been
ranked for 19 consecutive years as one of the “100 Best Companies
to Work For” in America by Fortune magazine. For more
information, please visit www.wholefoodsmarket.com.
Disclaimer on Forward-looking
StatementsCertain statements in this press release and
from time to time in other filings with the Securities and Exchange
Commission, news releases, reports, and other written and oral
communications made by us and our representatives, constitute
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These
forward-looking statements are often identified by words such as
“anticipate,” “believe,” “estimate,” “expect,” “continue,” “could,”
“can,” “may,” “will,” “likely,” “depend,” “should,” “would,”
“plan,” “predict,” “target,” and similar expressions, and include
references to assumptions and relate to our future prospects,
developments and business strategies. Except for the
historical information contained herein, the matters discussed in
this press release are forward-looking statements that are based on
the Company’s current assumptions and involve risks and
uncertainties that may cause our actual results to be materially
different from such forward-looking statements and could materially
adversely affect our business, financial condition, operating
results and cash flows. These forward-looking statements may
include comments relating to, among other things, future earnings
per share and the Company’s intention to obtain additional debt in
the near term and to make planned share repurchases, some of which
are subject to risks and uncertainties relating to general business
conditions, conditions in the credit and capital markets, changes
in overall economic conditions that impact consumer spending,
including fuel prices and housing market trends, the impact of
competition and other factors which are often beyond the control of
the Company, as well other risks listed in the Company’s Annual
Report on Form 10-K for the fiscal year ended September 27, 2015
and Quarterly Report on Form 10-Q for the third quarter ended July
3, 2016, and other risks and uncertainties not presently known to
us or that we currently deem immaterial. We wish to caution
you that you should not place undue reliance on such
forward-looking statements, which speak only as of the date on
which they were made. We do not undertake any obligation to
update forward-looking statements.
The Company will host a conference call today to
discuss this earnings announcement at 4:00 p.m. CT. The
dial-in number is (866) 393-4306, and the conference ID is “Whole
Foods.” A simultaneous audio webcast will be available at
www.investor.wholefoodsmarket.com.
|
|
|
|
|
|
|
|
|
Whole Foods Market, Inc. |
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
(unaudited) |
|
|
|
|
|
|
|
|
(In millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended |
|
52 weeks ended |
|
|
|
|
September 25, 2016 |
|
September 27, 2015 |
|
September 25, 2016 |
|
September 27, 2015 |
|
Sales |
$ |
3,497 |
|
|
$ |
3,438 |
|
|
$ |
15,724 |
|
|
$ |
15,389 |
|
|
Cost of goods sold and occupancy costs |
|
2,303 |
|
|
|
2,252 |
|
|
|
10,313 |
|
|
|
9,973 |
|
|
|
Gross
profit |
|
1,194 |
|
|
|
1,186 |
|
|
|
5,411 |
|
|
|
5,416 |
|
|
Selling, general and administrative expenses |
|
1,019 |
|
|
|
1,080 |
|
|
|
4,477 |
|
|
|
4,472 |
|
|
|
Operating
income before pre-opening and store closure |
|
175 |
|
|
|
106 |
|
|
|
934 |
|
|
|
944 |
|
|
Pre-opening expenses |
|
15 |
|
|
|
14 |
|
|
|
64 |
|
|
|
67 |
|
|
Relocation, store closure and lease termination
costs |
|
5 |
|
|
|
4 |
|
|
|
13 |
|
|
|
16 |
|
|
|
Operating
income |
|
155 |
|
|
|
88 |
|
|
|
857 |
|
|
|
861 |
|
|
Interest expense |
|
(11 |
) |
|
|
- |
|
|
|
(41 |
) |
|
|
- |
|
|
Investment and other income |
|
3 |
|
|
|
4 |
|
|
|
11 |
|
|
|
17 |
|
|
|
Income before income taxes |
|
147 |
|
|
|
92 |
|
|
|
827 |
|
|
|
878 |
|
|
Provision for income taxes |
|
59 |
|
|
|
36 |
|
|
|
320 |
|
|
|
342 |
|
|
|
Net income |
$ |
88 |
|
|
$ |
56 |
|
|
$ |
507 |
|
|
$ |
536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.28 |
|
|
$ |
0.16 |
|
|
$ |
1.55 |
|
|
$ |
1.49 |
|
|
Weighted average shares outstanding |
|
318.5 |
|
|
|
354.6 |
|
|
|
326.1 |
|
|
|
358.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$ |
0.28 |
|
|
$ |
0.16 |
|
|
$ |
1.55 |
|
|
$ |
1.48 |
|
|
Weighted average shares outstanding, diluted basis |
|
319.0 |
|
|
|
356.1 |
|
|
|
326.9 |
|
|
|
360.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
$ |
0.135 |
|
|
$ |
0.130 |
|
|
$ |
0.540 |
|
|
$ |
0.520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended |
|
52 weeks ended |
|
|
|
|
September 25, 2016 |
|
September 27, 2015 |
|
September 25, 2016 |
|
September 27, 2015 |
|
Net
income |
|
|
|
|
|
|
|
|
(numerator for basic and diluted earnings per
share) |
$ |
88 |
|
|
$ |
56 |
|
|
$ |
507 |
|
|
$ |
536 |
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
(denominator for basic earnings per share) |
|
318.5 |
|
|
|
354.6 |
|
|
|
326.1 |
|
|
|
358.5 |
|
|
|
Incremental
common shares attributable to dilutive effect |
|
|
|
|
|
|
|
|
|
of share-based awards |
|
0.5 |
|
|
|
1.5 |
|
|
|
0.8 |
|
|
|
2.3 |
|
|
Weighted
average common shares outstanding and |
|
|
|
|
|
|
|
|
potential
additional common shares outstanding |
|
|
|
|
|
|
|
|
(denominator for diluted earnings per share) |
|
319.0 |
|
|
|
356.1 |
|
|
|
326.9 |
|
|
|
360.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.28 |
|
|
$ |
0.16 |
|
|
$ |
1.55 |
|
|
$ |
1.49 |
|
|
Diluted earnings per share |
$ |
0.28 |
|
|
$ |
0.16 |
|
|
$ |
1.55 |
|
|
$ |
1.48 |
|
|
Whole Foods Market, Inc. |
|
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive Income
(unaudited) |
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended |
|
52 weeks ended |
|
|
|
|
September 25, 2016 |
|
September 27, 2015 |
|
September 25, 2016 |
|
September 27, 2015 |
|
Net income |
$ |
88 |
|
|
$ |
56 |
|
|
$ |
507 |
|
|
$ |
536 |
|
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
|
(3 |
) |
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(21 |
) |
|
Other comprehensive loss, net of tax |
|
(3 |
) |
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(21 |
) |
|
Comprehensive income |
$ |
85 |
|
|
$ |
50 |
|
|
$ |
503 |
|
|
$ |
515 |
|
|
Whole Foods Market, Inc. |
|
|
|
|
Consolidated Balance Sheets (unaudited) |
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
September 25, 2016 |
|
September 27, 2015 |
|
Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
351 |
|
|
$ |
237 |
|
|
|
Short-term investments - available-for-sale securities |
|
379 |
|
|
|
155 |
|
|
|
Restricted cash |
|
122 |
|
|
|
127 |
|
|
|
Accounts
receivable |
|
242 |
|
|
|
218 |
|
|
|
Merchandise
inventories |
|
517 |
|
|
|
500 |
|
|
|
Prepaid expenses and other current assets |
|
167 |
|
|
|
108 |
|
|
|
Deferred
income taxes |
|
197 |
|
|
|
199 |
|
|
|
|
Total current assets |
|
1,975 |
|
|
|
1,544 |
|
|
Property
and equipment, net of accumulated depreciation and
amortization |
|
3,442 |
|
|
|
3,163 |
|
|
Long-term
investments - available-for-sale securities |
|
- |
|
|
|
63 |
|
|
Goodwill |
|
710 |
|
|
|
710 |
|
|
Intangible assets, net of accumulated amortization |
|
74 |
|
|
|
79 |
|
|
Deferred income taxes |
|
100 |
|
|
|
144 |
|
|
Other assets |
|
40 |
|
|
|
38 |
|
|
|
Total assets |
$ |
6,341 |
|
|
$ |
5,741 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’
Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Current installments of long-term debt and capital lease
obligations |
$ |
3 |
|
|
$ |
3 |
|
|
|
Accounts
payable |
|
307 |
|
|
|
295 |
|
|
|
Accrued payroll, bonus and other benefits due team members |
|
407 |
|
|
|
436 |
|
|
|
Dividends payable |
|
43 |
|
|
|
45 |
|
|
|
Other current liabilities |
|
581 |
|
|
|
473 |
|
|
|
|
Total
current liabilities |
|
1,341 |
|
|
|
1,252 |
|
|
Long-term
debt and capital lease obligations, less current installments |
|
1,048 |
|
|
|
62 |
|
|
Deferred
lease liabilities |
|
640 |
|
|
|
587 |
|
|
Other
long-term liabilities |
|
88 |
|
|
|
71 |
|
|
|
Total liabilities |
|
3,117 |
|
|
|
1,972 |
|
|
|
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
Common stock, no par value, 1,200 shares authorized; |
|
|
|
|
|
377.0 and 377.1 shares issued; 318.3 and 348.9 shares
outstanding |
|
|
|
|
|
at 2016 and 2015, respectively |
|
2,933 |
|
|
|
2,904 |
|
|
Common stock in treasury, at cost, 58.7 and 28.2 shares at 2016
and 2015, respectively |
|
(2,026 |
) |
|
|
(1,124 |
) |
|
Accumulated other comprehensive loss |
|
(32 |
) |
|
|
(28 |
) |
|
Retained earnings |
|
2,349 |
|
|
|
2,017 |
|
|
|
Total shareholders’ equity |
|
3,224 |
|
|
|
3,769 |
|
|
|
Total liabilities and shareholders’ equity |
$ |
6,341 |
|
|
$ |
5,741 |
|
|
|
|
|
|
|
|
|
Whole Foods Market, Inc. |
|
|
|
Consolidated Statements of Cash Flows
(unaudited) |
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
|
|
|
|
September 25, 2016 |
|
September 27, 2015 |
Cash flows from operating
activities |
|
|
|
|
|
|
Net
income |
|
|
|
$ |
507 |
|
|
$ |
536 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and
amortization |
|
|
|
498 |
|
|
|
439 |
|
Impairment of
long-lived assets |
|
|
|
5 |
|
|
|
48 |
|
Share-based
payment expense |
|
|
|
49 |
|
|
|
64 |
|
LIFO expense
(benefit) |
|
|
|
(7 |
) |
|
|
1 |
|
Deferred income
tax expense (benefit) |
|
|
|
47 |
|
|
|
(43 |
) |
Excess tax
benefit related to exercise of team member stock options |
|
|
|
(4 |
) |
|
|
(11 |
) |
Accretion of
premium/discount on marketable securities |
|
|
|
1 |
|
|
|
17 |
|
Deferred lease
liabilities |
|
|
|
43 |
|
|
|
32 |
|
Other |
|
|
|
11 |
|
|
|
5 |
|
Net change in
current assets and liabilities: |
|
|
|
Accounts
receivable |
|
(24 |
) |
|
|
(21 |
) |
Merchandise
inventories |
|
(11 |
) |
|
|
(61 |
) |
Prepaid expenses
and other current assets |
|
(59 |
) |
|
|
(9 |
) |
Accounts
payable |
|
13 |
|
|
|
20 |
|
Accrued payroll,
bonus and other benefits due team members |
|
(29 |
) |
|
|
58 |
|
Other current
liabilities |
|
62 |
|
|
|
47 |
|
Net change in
other long-term liabilities |
|
14 |
|
|
|
7 |
|
Net cash provided by operating activities |
|
|
|
1,116 |
|
|
|
1,129 |
|
Cash flows from investing
activities |
|
|
|
|
|
|
Development costs of new locations |
|
|
|
|
(395 |
) |
|
|
(516 |
) |
Other
property and equipment expenditures |
|
|
|
|
(321 |
) |
|
|
(335 |
) |
Purchases of available-for-sale securities |
|
|
|
|
(593 |
) |
|
|
(494 |
) |
Sales
and maturities of available-for-sale securities |
|
|
|
|
431 |
|
|
|
928 |
|
Purchase
of intangible assets |
|
|
|
|
(2 |
) |
|
|
(3 |
) |
Decrease
(increase) in restricted cash |
|
|
|
|
4 |
|
|
|
(19 |
) |
Payment
for purchase of acquired entities, net of cash acquired |
|
|
|
|
(11 |
) |
|
|
(4 |
) |
Other
investing activities |
|
|
|
|
(8 |
) |
|
|
(12 |
) |
Net cash used in investing activities |
|
|
(895 |
) |
|
|
(455 |
) |
Cash flows from financing
activities |
|
|
|
|
|
|
Purchases of treasury stock |
|
|
|
|
(944 |
) |
|
|
(513 |
) |
Common
stock dividends paid |
|
|
|
|
(177 |
) |
|
|
(184 |
) |
Issuance
of common stock |
|
|
|
|
19 |
|
|
|
66 |
|
Excess
tax benefit related to exercise of team member stock options |
|
|
|
|
4 |
|
|
|
11 |
|
Proceeds
from long-term borrowings |
|
|
|
|
999 |
|
|
|
- |
|
Proceeds
from revolving line of credit |
|
|
|
|
300 |
|
|
|
- |
|
Payments
on long-term debt and capital lease obligations |
|
|
|
|
(306 |
) |
|
|
(1 |
) |
Other
financing activities |
|
(8 |
) |
|
|
(1 |
) |
Net cash used in financing activities |
|
|
(113 |
) |
|
|
(622 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
|
6 |
|
|
|
(5 |
) |
Net
change in cash and cash equivalents |
|
|
|
|
114 |
|
|
|
47 |
|
Cash and cash equivalents at beginning of period |
|
|
237 |
|
|
|
190 |
|
Cash and cash equivalents at end of period |
|
$ |
351 |
|
|
$ |
237 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Federal and state
income taxes paid |
$ |
377 |
|
|
$ |
383 |
|
Interest paid |
|
$ |
27 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
Whole Foods Market, Inc. |
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures (unaudited) |
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, the Company
provides information regarding Earnings Before Interest, Taxes,
Depreciation and Amortization (“EBITDA”), Adjusted EBITDA and Free
Cash Flow in the press release as additional information about its
operating results. These measures are not in accordance with,
or an alternative to, GAAP. The Company’s management believes
that these presentations provide useful information to management,
analysts and investors regarding certain additional financial and
business trends relating to its results of operations and financial
condition. In addition, management uses these measures for
reviewing the financial results of the Company as well as a
component of incentive compensation. Further, Adjusted EBITDA is
used in connection with covenant compliance associated with the
Company’s Senior Notes and Credit Agreement. |
|
|
|
|
|
|
|
|
|
|
|
The
Company defines Adjusted EBITDA as EBITDA plus non-cash share-based
payment expense and deferred rent. The following is a tabular
reconciliation of the non-GAAP financial measure Adjusted EBITDA to
GAAP net income, which the Company believes to be the most directly
comparable GAAP financial measure. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended |
|
52 weeks ended |
|
EBITDA and Adjusted EBITDA |
September 25, 2016 |
|
September 27, 2015 |
|
September 25, 2016 |
|
September 27, 2015 |
|
Net income |
$ |
88 |
|
|
$ |
56 |
|
|
$ |
507 |
|
|
$ |
536 |
|
|
Provision
for income taxes |
|
59 |
|
|
|
36 |
|
|
|
320 |
|
|
|
342 |
|
|
Interest
expense |
|
11 |
|
|
|
- |
|
|
|
41 |
|
|
|
- |
|
|
Investment and other income |
|
(3 |
) |
|
|
(4 |
) |
|
|
(11 |
) |
|
|
(17 |
) |
|
Operating income |
|
155 |
|
|
|
88 |
|
|
|
857 |
|
|
|
861 |
|
|
Depreciation and amortization |
|
121 |
|
|
|
108 |
|
|
|
498 |
|
|
|
439 |
|
|
EBITDA |
|
276 |
|
|
|
196 |
|
|
|
1,355 |
|
|
|
1,300 |
|
|
Share-based
payment expense |
|
10 |
|
|
|
13 |
|
|
|
49 |
|
|
|
64 |
|
|
Deferred rent |
|
|
12 |
|
|
|
7 |
|
|
|
48 |
|
|
|
34 |
|
|
Adjusted EBITDA |
$ |
298 |
|
|
$ |
216 |
|
|
$ |
1,452 |
|
|
$ |
1,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company defines Free Cash Flow as net cash provided by operating
activities less capital expenditures. The following is a tabular
reconciliation of the Free Cash Flow non-GAAP financial
measure. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended |
|
52 weeks ended |
|
Free Cash Flow |
September 25, 2016 |
|
September 27, 2015 |
|
September 25, 2016 |
|
September 27, 2015 |
|
Net cash
provided by operating activities |
|
$ |
352 |
|
|
$ |
132 |
|
|
$ |
1,116 |
|
|
$ |
1,129 |
|
|
Development costs of new locations |
|
|
(100 |
) |
|
|
(105 |
) |
|
|
(395 |
) |
|
|
(516 |
) |
|
Other property and equipment expenditures |
|
|
(95 |
) |
|
|
(67 |
) |
|
|
(321 |
) |
|
|
(335 |
) |
|
Free Cash Flow |
$ |
157 |
|
|
$ |
(40 |
) |
|
$ |
400 |
|
|
$ |
278 |
|
|
|
|
|
|
|
|
|
|
|
|
Whole Foods Market, Inc. |
|
|
|
|
|
|
|
Non-GAAP Financial Measures (unaudited) |
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, the Company
provides information regarding Return on Invested Capital (“ROIC”)
and Adjusted ROIC as additional information about its operating
results. These measures are not in accordance with, or an
alternative to, GAAP. The Company’s management believes this
presentation provides useful information to management, analysts
and investors regarding certain additional financial and business
trends relating to its results of operations and financial
condition. In addition, management uses this measure for
reviewing the financial results of the Company as well as a
component of incentive compensation. The Company defines ROIC
as ROIC earnings divided by average invested capital. ROIC
earnings and adjustments to ROIC earnings are defined in the
following tabular reconciliation. Invested capital reflects a
trailing four-quarter average. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
ROIC |
|
|
|
|
September 25, 2016 |
|
September 27, 2015 |
Net income |
|
|
|
|
$ |
507 |
|
|
$ |
536 |
|
Interest
expense, net of tax |
|
|
|
|
|
25 |
|
|
|
- |
|
ROIC earnings |
|
|
|
|
|
532 |
|
|
|
536 |
|
Total rent expense, net of tax1 |
|
|
|
|
|
285 |
|
|
|
261 |
|
Estimated depreciation on capitalized operating leases,
net of tax2 |
|
|
|
|
|
(190 |
) |
|
|
(174 |
) |
ROIC earnings, including the effect of capitalized operating
leases |
|
|
|
|
$ |
627 |
|
|
$ |
623 |
|
|
|
|
|
|
|
|
|
|
Average
working capital, excluding current portion of long-term debt |
|
|
|
|
$ |
615 |
|
|
$ |
472 |
|
Average
property and equipment, net |
|
|
|
|
|
3,296 |
|
|
|
3,066 |
|
Average
other assets |
|
|
|
|
|
987 |
|
|
|
1,084 |
|
Average other liabilities |
|
|
|
|
|
(698 |
) |
|
|
(637 |
) |
Average invested capital |
|
|
|
|
|
4,200 |
|
|
|
3,985 |
|
Average estimated asset base of capitalized operating
leases3 |
|
|
|
|
|
3,718 |
|
|
|
3,417 |
|
Average invested capital, including the effect of
capitalized operating leases |
|
|
|
|
$ |
7,918 |
|
|
$ |
7,402 |
|
|
|
|
|
|
|
|
|
|
ROIC |
|
|
|
|
|
12.7 |
% |
|
|
13.4 |
% |
ROIC, including the effect of capitalized of operating
leases |
|
|
|
|
|
7.9 |
% |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted ROIC |
|
|
|
|
|
|
|
Net income |
|
|
|
|
$ |
507 |
|
|
$ |
536 |
|
Interest
expense, net of tax |
|
|
|
|
|
25 |
|
|
|
- |
|
Adjustments, net of
tax4 |
|
|
|
|
|
|
- |
|
|
|
49 |
|
Adjusted ROIC earnings |
|
|
|
|
|
532 |
|
|
|
585 |
|
Total rent expense, net of tax1 |
|
|
|
|
|
285 |
|
|
|
261 |
|
Estimated depreciation on capitalized operating leases,
net of tax2 |
|
|
|
|
|
(190 |
) |
|
|
(174 |
) |
Adjusted ROIC earnings, including the effect of
capitalized operating leases |
|
|
|
$ |
627 |
|
|
$ |
672 |
|
|
|
|
|
|
|
|
|
|
Average
working capital, excluding current portion of long-term debt |
|
|
|
|
$ |
615 |
|
|
$ |
472 |
|
Average
property and equipment, net |
|
|
|
|
|
3,296 |
|
|
|
3,066 |
|
Average
other assets |
|
|
|
|
|
987 |
|
|
|
1,084 |
|
Average other liabilities |
|
|
|
|
|
(698 |
) |
|
|
(637 |
) |
Average invested capital |
|
|
|
|
|
4,200 |
|
|
|
3,985 |
|
Average estimated asset base of capitalized operating
leases3 |
|
|
|
|
|
3,718 |
|
|
|
3,417 |
|
Average invested capital, including the effect of
capitalized operating leases |
|
|
|
|
$ |
7,918 |
|
|
$ |
7,402 |
|
|
|
|
|
|
|
|
|
|
Adjusted ROIC |
|
|
|
|
|
12.7 |
% |
|
|
14.7 |
% |
Adjusted ROIC, including the effect of capitalized
operating leases |
|
|
|
|
|
7.9 |
% |
|
|
9.1 |
% |
|
|
|
|
|
|
|
|
|
1 Total
rent includes minimum base rent of all tendered leases |
|
|
|
|
|
|
|
2 Estimated depreciation equals two-thirds of total rent
expense |
|
|
|
|
|
|
|
3 Estimated asset base equals eight times total rent
expense |
|
|
|
|
|
|
|
4Adjustments include non-cash asset impairment charges and Q4
2015 restructuring charge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Relations Contact:
Cindy McCann
VP of Investor Relations
512.542.0204
Media Contact:
Brooke Buchanan
Brooke.Buchanan@wholefoods.com
512.542.0751
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