Whole Foods Q1 income jumps 79%, same-store sales up 9.1%
Austin, Texas — Whole Foods Market’s first quarter net income surged 79% to $88.7 million, on an increase in customer visits and a rise in average transactions. The natural and organic foods grocer raised its 2011 profit outlook on strong results, which beat expectations.
Sales for the quarter, ended Jan. 16, increased 14% to $3.0 billion. Same-store sales were up 9.1%, the highest level in four years. On a conference call with analysts, Walter Robb, Whole Foods’ co-chief executive officer, said average weekly sales per store for all stores increased 9% to $621,000, translating to sales per square foot of approximately $856.
"We are proud that we are continuing to gain market share at a much faster rate than most public food retailers," Robb said.
Whole Foods opened three stores and expanded one store in the first quarter. It expects to open three new stores, including one relocation, in the second quarter. The company also recently signed leases in Ottawa; Danbury, Conn.; Jamaica Plain, Mass; Lynnfield, Mass; Marlboro, N.J.; and San Antonio. These stores currently are scheduled to open in fiscal year 2012 and beyond.
Advance Auto Parts 4Q EPS surges
It was almost all good news for Advance Auto parts this week, as the company reported record fourth-quarter sales and profits. Fourth-quarter earnings per share increased 46% to 57 cents compared with 36 cents during the comparable period the prior year, and full-year profits rose to $3.95 from $2.83 the prior year.
The profit performance was the result of improved productivity at existing stores combined with the addition of new stores. Advance Auto Parts added 143 new units during the past 12 months, which brought its store count to 3,563 units and contributed to total fourth-quarter sales that increased 11.1% to nearly $1.3 billion, while same-store sales increased 8.9%, better than the 7.1% analysts were expecting.
Strong sales trends enabled the company to produce a fourth-quarter operating margin rate of 6.6% compared with 5% during the comparable period the prior year. The gross margin rate increased to 49.4% from 47.9% while expenses as a percentage of sales were essentially flat at 42.8%.
“Overall, 2010 marked our third consecutive year of improved financial and operational performance,” said CFO Mike Norona. “While our performance in 2010 was fueled by strong industry dynamics and favorable weather patterns, the strategic choices we have made through our investments and the superior execution of our team played a significant role and enabled us to gain market share and position our company for long term growth and success.”
To achieve success in the coming year, the company is planning a slightly less ambitious pace of expansion and moderating its financial assumptions compared with 2010. For example, a total of 120 to 140 new stores are planned compared with the 143 stores opened last year and same-store sales are forecast to be in the low to mid-single digit range as opposed to the hefty 8% increase produced in 2010. Full-year earnings are forecast to fall in a range of $4.60 to $4.80, which would represent a 16.4% to 21.5% increase from 2010 earnings per share of $3.95. Although such figures would represent a moderation of growth compared to 2010, analysts were not dismayed by the guidance.
The automotive retail sector is driven by factors which affect it differently than other retailers. For example, an improved economic outlook for 2011, which would generally be good for most retailers, is actually bad for auto parts chains because people tend to buy new cars and they don’t break down as much. In addition, rising gas prices which could cause people to drive less also equates to less parts breakage. That’s a key reason why government statistics such as vehicles miles traveled are watched closely as an indicator of part breakage and consequently demand for auto parts. Harsh winter weather is also an important contributor to parts breakage.
Serving Up Stores
TCBY, The Country’s Best Yogurt, found its sweet spot in the chain’s infancy. The Salt Lake City-based frozen yogurt concept rocketed out of the chute — from a single Little Rock, Ark., store in 1981 to several hundred units in five years — based on a platform that Americans wanted a healthy alternative to ice cream.
The chain charged forward with purpose, reaching 3,000 units worldwide and $1.6 billion in revenue before the challenges that come with rapid expansion began to unravel the yogurt giant. A nine-year string of flat earnings during the 1990s culminated in swirling sale rumors and an acquisition by Mrs. Fields Famous Brands in 2000.
Ownership change, mounting losses and store closures, and a groundswell around super-premium ice cream negatively impacted the company and saw what once was a 3,000-unit chain dwindle into the hundreds. TCBY currently operates 406 units in the United States and 188 internationally; all but two stores are franchises.
But, in 2010, the company developed a prototype that operated under a different business model. Instead of customers ordering and being served in a traditional fashion, they serve themselves using any combination of available yogurt flavors, add their own mix of toppings and pay by the ounce. The innovative self-service concept, coupled with a frozen yogurt comeback, has breathed new life into a struggling chain.
Since the opening of the first TCBY self-serve model in Charlotte, N.C., another 15 or so have opened, and 20 are in the pipeline for the first quarter of 2011.
“Almost all new stores to open will be under the self-serve model going forward,” said Rob Streett, VP franchise development for TCBY. “We will still do traditional stores when the venue or the real estate calls for it, but most will be self-serve.”
The typical footprint for a self-serve store is 1,300 sq. ft. to 1,400 sq. ft., larger than the average 1,000- sq.-ft. to 1,200-sq.-ft. full-service unit. The increased footage accommodates the topping bar, added equipment and amenities such as soft seating and flat-panel televisions. “The new prototype is intended, like a Starbucks, to promote socialization,” Streett said.
Site criteria haven’t changed much with the self-serve model. The TCBY demographic is a $70,000+ average income and a population base of 50,000 or more. Desirable anchors or co-tenants are casual-dining restaurants, booksellers or other concepts that provide a significant nighttime draw. “It is critical that we have those evening draws, or we are challenged to have a successful store,” Streett said.
TCBY has partnered with Fort Worth, Texas-based Buxton to evaluate the existing portfolio and prep the chain for an expansion plan that calls for 100 new self-service locations worldwide in 2011 and another 100 per year over the next three years, depending on the availability and cost of real estate. The Buxton solution is allowing TCBY to map out and benchmark its competition, and provides a tool to help franchisees with site selection and market identification. With information gained from the solution rollout, slated for the first quarter of 2011, TCBY will identify what leases should be re-upped and what stores need to be closed, relocated or converted to the self-serve model.
The main avenue for growth will be via franchising, although the company is exploring a limited number of corporate stores from which it can conduct menu and concept testing.
“We have an aggressive expansion plan,” Streett said, “but we can be thoughtful and selective in our growth, thanks to the excitement in our brand and our category. There is a lot of breadth to where we can go.”