Whole Foods 2011 Annual Report Download - page 26

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Whole Foods Market, Inc. is the world’ s leading retailer of natural and organic foods and America’ s first national “Certified
Organic” grocer. Our Company mission is to promote vitality and well-being for all individuals by supplying the highest
quality, most wholesome foods available. Through our growth, we have had a significant and positive impact on the natural
and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance. The
Company was formed in 1980 and, as of September 25, 2011, operated 311 stores: 299 stores in 38 U.S. states and the
District of Columbia; seven stores in Canada; and five stores in the United Kingdom. We have one operating segment,
natural and organic foods supermarkets.
Our results of operations have been and may continue to be materially affected by the timing and number of new store
openings. New stores generally become profitable within their first year of operation; although some new stores may incur
operating losses for the first several years of operation. The Company’ s average weekly sales and gross profit are typically
highest in the second and third fiscal quarters, and lowest in the fourth fiscal quarter. Average weekly sales and gross profit
are typically lower in the first fiscal quarter due to the product mix of holiday sales, and in the fourth fiscal quarter due to the
seasonally slower sales during the summer months.
Sales of a store are deemed to be comparable commencing in the fifty-third full week after the store was opened or acquired.
Stores acquired in purchase acquisitions enter the comparable store sales base effective the fifty-third full week following the
date of the merger. Identical store sales exclude sales from relocated stores and remodeled stores with expansions of square
footage greater than 20% from the comparable calculation to reduce the impact of square footage growth on the comparison.
Stores closed for eight or more days are excluded from the comparable and identical store base from the first fiscal week of
closure until re-opened for a full fiscal week.
The Company reports its results of operations on a 52- or 53-week fiscal year ending on the last Sunday in September. Fiscal
years 2011, 2010 and 2009 were 52-week years.
Economic and Industry Factors
Food retailing is a large, intensely competitive industry. Our competition varies across the Company and includes but is not
limited to local, regional, national and international conventional and specialty supermarkets, natural foods stores, warehouse
membership clubs, smaller specialty stores, farmers’ markets, and restaurants, each of which competes with us on the basis
of store ambiance and experience, product selection, quality, customer service, price or a combination of these factors.
Natural and organic food continues to be one of the fastest growing segments of food retailing today. Our commitment to
natural and organic products, high quality standards, emphasis on perishable product sales, healthy eating products and
education, range of choices based on price, and empowered team members who focus on unparalleled customer service
differentiate us from the competition and have created a loyal customer base.
We have worked very hard over the last couple of years to successfully improve our price image, particularly in perishables,
and we remain focused on maintaining our relative price positioning in the marketplace. We are hopeful we can continue to
strike the right balance between rising product costs and our retail pricing based on our contracts, distribution, and tools to
manage value.
Highlights for Fiscal Year 2011
We are pleased to end fiscal year 2011 with strong sales growth, solid execution, and capital discipline. We believe our
pleasurable store experience, outstanding service, high quality standards and differentiated product mix have been the
primary drivers of our growth and success. We are committed to maintaining our unique positioning in these areas. We are
gaining market share at a faster rate than most public food retailers and attribute much of our success to the progress we have
made in our well-executed value efforts which have positively impacted our price image while continuing to raise the bar in
areas that matter to our customers – particularly our quality standards, and health and wellness. These initiatives are aligned
with our core customer base and reinforce our position as the authentic retailer of natural and organic foods, further
differentiating the Whole Foods Market shopping experience and making us the preferred choice for customers aspiring to a
healthier lifestyle. In fiscal year 2011:
• Sales increased 12.2% over the prior year to $10.11 billion driven by an 8.5% comparable store sales increase.
Identical store sales increased 8.4% over the prior year;
• Income available to common shareholders increased 42.5% over the prior year to $342.6 million;
• Diluted earnings per share increased 35.0% over the prior year to $1.93;
• We produced $754.8 million in cash flow from operations and invested $365.0 million in capital expenditures;
• We repaid the $490 million balance on our term loan;
20