Whole Foods 2011 Annual Report Download - page 4

letter to stakeholders
Dear Fellow Stakeholders:
Fiscal 2011 was another incredible year for our company. In the midst of a wavering economy, rising inflation
and increasingly tougher sales comparisons, we executed at a high level with sales increasing 12% to top $10
billion and operating margin improving to 5.4%. We delivered:
• 8. % store sales growth, our highest result in five years;
• average weekly sales per store of $636,000, translating to sales per square foot of $874;
• 17% growth in EBITDA to $835 million;
• a 35% increase in diluted earnings per share to $1.93; and
• a 220 basis point year-over-year improvement in NOPAT* return on invested capital to 11.1%.
Our performance substantially exceeded our own expectations, as well as Wall Street’s, driving a 38% boost in
our stock price during the calendar year versus the S&P 500 Index, which was flat year over year.
We are proud that we continued to gain market share at a faster rate than most public food retailers and
attribute much of our success to our visible value efforts which have positively impacted our price image.
Navigating the balance between price investments, gross margin and sales momentum was increasingly
challenging given the rising rate of inflation throughout the year. Competitors continued to act rationally,
however, and we were able to selectively pass through product cost increases. We even saw signs of customers
trading up as sales shifted year over year toward organic products, higher-priced tiers, and discretionary
categories, with an increase in transactions over $50 as well.
While maintaining our relative value positioning remained a top priority, we continued to differentiate our
shopping experience while raising the bar. Building on the success of our seafood sustainability ratings
program introduced last year, we rolled-out 5-Step™ Animal Welfare Rating standards and our new Eco-Scale™
Rating System, introduced in-store Wellness Clubs, and expanded our exclusive brand offerings.
The 5-Step Animal Welfare Rating standards recognize producers for their efforts in improving the welfare of
animals and offer customers a new level of transparency. As of May, all fresh and pre-packaged beef, pork and
chicken products offered in our U.S. stores had third-party certified animal welfare ratings.
Our Eco-Scale Rating System allows customers to easily identify a household cleaning product’s environmental
impact and safety based on a red-orange-yellow-green scale. We are committed to all of our cleaning products
meeting the baseline orange standard by Earth Day, April 2012.
We opened four in-store Wellness Clubs in Chicago, Oakland, New York City and Dedham, Massachusetts
with another scheduled to open in Princeton, New Jersey in January. Offerings include: a 10% discount on
thousands of designated healthy foods; nutrition courses; culinary classes; supper clubs; coaching and
support; a wellness assessment tool; and access to benefits from a local network of community businesses.
We plan to expand the concept to reach more customers in the future.
This year we made significant progress in differentiating our product offering through exclusive brands. We
added approximately 400 new SKUs, reinvented some categories such as household products, and renewed
our efforts around packaging. We believe our growth in this area played a key part in our ability to successfully
compete this year.
We always are looking for ways to raise the bar and further differentiate the Whole Foods Market shopping
experience. Our internal research shows we have a healthy combination of loyal core customers and new
customers discovering us for the first time. We believe our initiatives in areas such as value, animal welfare,
*Net operating profits after taxes
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