Whole Foods 2014 Annual Report Download - page 25

Download and view the complete annual report

Please find page 25 of the 2014 Whole Foods annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 61

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61

22
Gross Profit
Gross profit totaled approximately $5.0 billion, $4.6 billion and $4.2 billion in fiscal years 2014, 2013 and 2012, respectively.
Gross profit as a percentage of sales decreased 30 basis points in fiscal year 2014 compared to the prior fiscal year. Net LIFO
inventory reserves increased approximately $16 million during fiscal year 2014, due primarily to inflation in product costs, as
compared to an increase of approximately $2 million in fiscal year 2013, resulting in a negative impact of 10 basis points year
over year. Cost of goods increased 18 basis points as a percentage of sales during fiscal year 2014, reflecting the decision not
to pass through all product cost increases to customers as part of our value strategy. Gross profit as a percentage of sales increased
31 basis points and 53 basis points in fiscal years 2013 and 2012, respectively, compared to the prior fiscal years. Increases in
prior years were driven primarily by improvement in occupancy costs and costs of goods sold. Additionally, the increase in gross
profit as a percentage of sales in fiscal year 2012 reflects a 10 basis point improvement in LIFO due to moderation of inflation
during the year.
Our gross profit may increase or decrease slightly depending on the mix of sales from new stores, our value strategy, 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 $3.6 billion, $3.3 billion and $3.0 billion in fiscal years 2014, 2013 and 2012,
respectively. During fiscal year 2014, the 16 basis point decrease in direct store expenses as a percentage of sales reflects equal
leverage in wages and health care costs, while the 7 basis point decrease in direct store expenses as a percentage of sales during
fiscal year 2013 reflects leverage in wages. 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
health care costs.
General and Administrative Expenses
General and administrative expenses totaled approximately $446 million, $397 million and $372 million in fiscal years 2014,
2013 and 2012, respectively. During fiscal year 2014, general and administrative expenses as a percentage of sales increased
seven basis points, primarily due to higher share-based payment expense and additional investments in technology. The
improvement in general and administrative expenses as a percentage of sales during fiscal year 2013 of 11 basis points was due
primarily to leverage in wages. 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.
Share-based payment expense was included in the following line items on the Consolidated Statements of Operations for the
fiscal years indicated (in millions):
2014 2013 2012
Cost of goods sold and occupancy costs $ 2 $ 2 $ 2
Direct store expenses 34 32 22
General and administrative expenses 32 23 18
Share-based payment expense before income taxes 68 57 42
Income tax benefit (26) (22) (16)
Net share-based payment expense $ 42 $ 35 $ 26
Pre-opening Expenses
Pre-opening expenses totaled approximately $67 million, $52 million and $47 million in fiscal years 2014, 2013 and 2012,
respectively. Average pre-opening expense per new store opened, including pre-opening rent, totaled approximately $2 million
in each of fiscal years 2014, 2013 and 2012.
Relocation, Store Closure and Lease Termination Costs
Relocation, store closure and lease termination costs totaled approximately $11 million, $12 million and $10 million in fiscal
years 2014, 2013 and 2012, respectively.
The numbers of stores opened, acquired and relocated were as follows:
2014 2013 2012
New and acquired stores 37 27 24
Relocated stores 1 5 1