Whole Foods 2012 Annual Report Download - page 32

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Comparable stores, relocated stores and remodels excluded from the identical store base, identical stores, and stores open less
than one fiscal year were as follows:
2012 2011 2010
Comparable stores 311 298 281
Relocated stores (7) (6) (6)
Remodels with major expansions (3) (1) (2)
Identical stores 301 291 273
Stores open less than one fiscal year 25 18 18
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 moderation of inflation, we saw our identical store sales breakout move toward approximately 80% transaction count and
20% basket size. During fiscal year 2012, our transaction count in identical stores increased 6.7%, continuing to accelerate from
the 5.7% increase we experienced in fiscal year 2011. The increase in transaction growth helped to offset the slower increase in
basket size year-over year. Basket size is partially impacted by our growth in new customers, who tend to have a smaller average
basket size. During fiscal year 2012, our basket size increased 1.7% compared to the 2.4% increase for fiscal year 2011.
Gross Profit
Gross profit totaled approximately $4.16 billion, $3.54 billion and $3.14 billion in fiscal years 2012, 2011 and 2010, respectively.
Net LIFO inventory reserves increased approximately $0.1 million and $10.3 million in fiscal years 2012 and 2011, respectively.
During fiscal year 2010, net LIFO inventory reserves decreased approximately $7.7 million due primarily to lower average
inventory balances and net deflation in product costs. Moderation of inflation during the fiscal year ended September 30, 2012
resulted in an almost flat net LIFO inventory reserve, as compared to rising product costs in the prior year. Excluding the LIFO
charge, gross profit increased 43 basis points, driven by improvement in occupancy costs and costs of goods sold. During fiscal
year 2011, 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. The Company realized sequentially lower cost of goods sold
during fiscal year 2010 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. The success of this ongoing strategy is reflected in our continued sales momentum
and the results from our most recent competitive survey. The survey indicates we dramatically improved our pricing position
versus our competitors during fiscal year 2012, resulting in our most competitive position in more than three years.
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 commodity costs or a host of other factors, including possible supply shortages, and extreme weather-related disruptions.
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 $2.98 billion, $2.63 billion and $2.38 billion in fiscal years 2012, 2011 and 2010,
respectively. The 51 basis point decrease in direct store expenses as a percentage of sales in fiscal year 2012 primarily reflects
leverage of 25 basis points in wages, 16 basis points in depreciation expense, and 8 basis points in healthcare costs. During fiscal
year 2011, the 38 basis point decrease in direct store expenses as a percentage of sales 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.
General and Administrative Expenses
General and administrative expenses totaled approximately $372.1 million, $310.9 million and $272.4 million in fiscal years
2012, 2011 and 2010, respectively. Higher wages and share-based payment expense, resulting primarily from our higher stock
price, drove the 10 basis point increase in general and administrative expenses as a percentage of sales during fiscal year 2012.
During fiscal year 2011, the increase in general and administrative expenses as a percentage of sales was primarily driven by
higher wages, including wage costs associated with new strategic initiatives, totaling 6 basis points as a percentage of sales.