Whole Foods 2011 Annual Report Download - page 28

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fiscal year. The number of stores open or acquired 52 weeks or less equaled 18, 18 and 15 at the end of fiscal years 2011,
2010 and 2009, respectively. The sales increase contributed by stores open or acquired within 52 weeks or less totaled
approximately $222.0 million, $251.8 million and $234.8 million for fiscal years 2011, 2010 and 2009, respectively.
We believe our efforts around value and differentiation continue to be a significant contributor to our momentum. Our
customers have shifted their buying toward branded and organic products, higher priced tiers, and to several discretionary
categories. With the return of inflation, we are seeing our identical store sales breakout move toward our historical pattern of
approximately 60% transaction count and 40% basket size. During fiscal year 2011, our transaction count in identical stores
increased 5.7%, an acceleration from the 5.1% increase we experienced in fiscal year 2010. During fiscal year 2011, our
basket size increased 2.4% compared to the 1.1% increase for fiscal year 2010, primarily driven by higher average prices per
item as we selectively passed through some product cost increases and continued to see signs of customers trading up.
Gross Profit
Gross profit totaled approximately $3.54 billion, $3.14 billion and $2.76 billion in fiscal years 2011, 2010 and 2009,
respectively. Net LIFO inventory reserves increased approximately $10.3 million in fiscal year 2011, due primarily to
inflation in product cost compared to a decrease in net LIFO inventory reserves of approximately $7.7 million and $5.6
million in fiscal years 2010 and 2009, respectively, due primarily to lower average inventory balances and net deflation in
product costs. Despite the 19 basis point impact from the LIFO charge, the Company maintained healthy gross margins by
balancing rising product costs while maintaining our relative value position. During fiscal years 2010 and 2009, the
Company realized sequentially lower cost of goods sold by taking advantage of buying opportunities and improving our
distribution, shrink control and inventory management.
We have maintained our commitment to offering highly competitive prices on known value items in addition to
implementing targeted pricing and promotional strategies. To the extent changes in costs are not reflected in changes in retail
prices or changes in retail prices are delayed, our gross profit will be affected. Our gross profit may increase or decrease
slightly depending on the mix of sales from new stores or the impact of weather or a host of other factors, including
seasonality, competition, inflation or deflation. Relative to existing stores, gross profit margins tend to be lower for new
stores and increase as stores mature, reflecting lower shrink as volumes increase, as well as increasing experience levels and
operational efficiencies of the store teams.
Direct Store Expenses
Direct store expenses totaled approximately $2.63 billion, $2.38 billion and $2.15 billion in fiscal years 2011, 2010 and
2009, respectively. The 38 basis point decrease in direct store expenses as a percentage of sales in fiscal year 2011 primarily
reflects leverage of 28 basis points in wages and 19 basis points in depreciation expense, partially offset by an increase in
costs, including worker’ s compensation expense of 5 basis points as a percentage of sales. During fiscal year 2010, the 34
basis point decrease in direct store expenses as a percentage of sales was primarily driven by an 18 basis point leverage in
depreciation expense as a percentage of sales and a decrease in asset impairment charges related to ongoing locations of 17
basis points as a percentage of sales.
General and Administrative Expenses
General and administrative expenses totaled approximately $310.9 million, $272.4 million and $243.7 million in fiscal years
2011, 2010 and 2009, respectively. The increase in general and administrative expenses as a percentage of sales during fiscal
year 2011 was primarily driven by higher wages, including wage costs associated with new strategic initiatives, totaling six
basis points as a percentage of sales. General and administrative expenses for fiscal year 2010 include share-based payment
costs related to restricted common stock grants of approximately $4.2 million. General and administrative expenses for fiscal
years 2010 and 2009 include FTC-related legal costs totaling approximately $2.5 million and $14.7 million, respectively.
Pre-opening Expenses
Pre-opening expenses totaled approximately $40.9 million, $38.0 million and $49.2 million in fiscal years 2011, 2010 and
2009, respectively. The Company opened 18, 16 and 15 new store locations during fiscal years 2011, 2010 and 2009,
respectively. Average pre-opening expense per new store, including pre-opening rent, totaled approximately $2.5 million,
$2.6 million and $3.0 million in fiscal years 2011, 2010 and 2009, respectively.
Relocation, Store Closure and Lease Termination Costs
Relocation, store closure and lease termination costs totaled approximately $8.3 million, $11.2 million and $31.2 million in
fiscal years 2011, 2010 and 2009, respectively. The Company relocated or closed six, one and six store locations during
fiscal years 2011, 2010 and 2009, respectively. Relocation, store closure and lease termination costs for fiscal years 2011,
2010 and 2009 include charges totaling approximately $1.6 million, $6.9 million and $9.5 million, respectively, to increase
store closure reserves for increased estimated net lease obligations for closed stores. During fiscal year 2010, the Company
recorded a gain totaling approximately $3.2 million related to the sale of a non-operating property. The Company recorded a