Whole Foods 2010 Annual Report Download - page 25

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expects interest expense, net of investment and other income, to range from approximately $1 million to $3 million in fiscal
year 2011. We expect diluted earnings per share for fiscal year 2011 to be in the range of $1.66 to $1.71, or 16% to 20%
growth year over year. This guidance reflects steady sales growth on tougher comparisons as well as our commitment to
delivering incremental earnings growth in excess of sales growth. The Company expects capital expenditures for fiscal year
2011 to be in the range of approximately $350 million to $400 million. The Company expects to produce cash flows from
operations in excess of its capital expenditure requirements on an annual basis.
Results of Operations
The following table sets forth our statements of operations data expressed as a percentage of total sales for the fiscal years
indicated:
2010 2009 2008
Sales 100.0% 100.0% 100.0%
Cost of goods sold and occupancy costs 65.2 65.7 66.0
Gross profit 34.8 34.3 34.0
Direct store expenses 26.4 26.7 26.5
General and administrative expenses 3.0 3.0 3.4
Pre-opening expenses 0.4 0.6 0.7
Relocation, store closure and lease termination costs 0.1 0.4 0.5
Operating income 4.9 3.5 3.0
Interest expense (0.4) (0.5) (0.5)
Investment and other income 0.1 - 0.1
Income before income taxes 4.6 3.1 2.6
Provision for income taxes 1.8 1.3 1.2
Net income 2.7 1.8 1.4
Preferred stock dividends 0.1 0.3 -
Income available to common shareholders 2.7% 1.5% 1.4%
Figures may not sum due to rounding.
Sales
Sales totaled approximately $9.01 billion, $8.03 billion and $7.95 billion in fiscal years 2010, 2009 and 2008, respectively,
representing increases of 12.1%, 1.0% and 20.7% over the previous fiscal years, respectively. Sales for all fiscal years shown
reflect increases due to identical store sales growth and new stores opened or acquired. We also have worked hard to
improve our value image and believe our success in this regard has played a large role in the sales momentum we are seeing.
Customers are still seeking value as demonstrated by continued strong sales growth in promotional and store-branded items;
however, national-branded product sales growth is outpacing store-branded sales growth, and customers are selectively
trading up to higher-priced items in certain areas. Comparable store sales increased approximately 7.1% and 4.9% in fiscal
years 2010 and 2008, respectively, and decreased approximately 3.1% in fiscal year 2009. As of September 26, 2010, there
were 281 locations in the comparable store base. The number of stores open or acquired 52-weeks or less equaled 18, 15 and
20 at the end of fiscal years 2010, 2009 and 2008, respectively. The sales increase contributed by stores open or acquired
within 52-weeks or less totaled approximately $251.8 million, $234.8 million and $236.1 million for fiscal years 2010, 2009
and 2008, respectively. Identical store sales increased approximately 6.5% and 3.6% in fiscal years 2010 and 2008,
respectively, and decreased approximately 4.3% in fiscal year 2009. Identical store sales in fiscal years 2010, 2009 and 2008
exclude from the comparable calculation six, twelve and seven store relocations, respectively, and two, three and three
remodels with major expansions, respectively, during portions of each fiscal year.
Gross Profit
Gross profit totaled approximately $3.14 billion, $2.75 billion and $2.71 billion in fiscal years 2010, 2009 and 2008,
respectively. Net LIFO inventory reserves were reduced by approximately $7.7 million and $5.6 million in fiscal years 2010
and 2009, respectively, due primarily to reduced inventory balances and net deflation in product costs compared to an
increase in net reserves of approximately $12.7 million in fiscal year 2008. 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.