Whole Foods Market Inc. says it is taking the right steps to position itself for the long term and sees demand for more than 1,200 stores in the United States despite reporting a lackluster increase in same store sales for the third quarter.
The health foods grocery retailer posted a same store sales increase of just 1.3% for third quarter ended July 5. Analysts had expected a 3% increase. The company did report earnings of 43 cents per share on $3.63 billion in revenue. Total sales increased 8% to a record $3.6 billion.
"In the third quarter, our sales increased 8% to a record $3.6 billion translating to healthy EBITDA margin and return on invested capital," said Walter Robb, co-chief executive officer of Whole Foods Market. "A strong balance sheet and cash flow of $1 billion year to date have enabled us to self-fund our new store development and strategic growth initiatives while returning over $325 million to our shareholders through dividends and share repurchases.
"In this rapidly changing marketplace, we believe we are taking the necessary steps to position ourselves for the longer term," added Robb. "We remain focused on innovating and evolving to best serve our customers' diverse purchasing preferences. From the unique experience of our Whole Foods Market stores, to our growing online channel for home delivery, to the exciting launch of our 365 by Whole Foods Market stores, we are making investments to extend our reach to both new and existing customers."
The company says it recently signed eight new leases for four Whole Foods Market and four 365 by Whole Foods Market stores. In addition, the company has renegotiated one lease in development, converting it from a Whole Foods Market to a 365 by Whole Foods Market store. The Whole Foods Market leases average 48,000 square feet and are located in Akron, Ohio; Exton, Pa.; Charleston, S.C.; and Kirkland, Wash.. The 365 by Whole Foods Market leases average 30,000 square feet and are located in Los Angeles and Santa Monica, Calif.; Portland, Ore.; Houston, Texas; and Bellevue, Wash.. These 365 by Whole Foods Market leases reflect stores scheduled to open through 2017.
"We are really excited about the progress we have made with securing real estate in markets where there is high demand for both quality food and value in a convenient format. We plan to open up to five 365 by Whole Foods Market stores in the second half of next year with the expectation of doubling the number of openings in 2017," said Jeff Turnas, president of 365 by Whole Foods Market. "Our first opening will be in the Silver Lake area of Los Angeles, which we think is an ideal community to bring a modern shopping experience that draws from the best innovations of Whole Foods Market stores and gives them a new expression. With a fresh format and unique product assortment, we think 365 will offer convenience and value while providing the quality standards and transparency that consumers love and expect."
The company currently has 424 stores totaling approximately 16 million square feet and expects to cross the 500-store mark in fiscal year 2017. Longer term, the company sees demand for more than 1,200 Whole Foods Market stores in the United States. The company's new 365 by Whole Foods Market format expands the growth opportunity beyond 1,200 stores.
Looking ahead, the company said it expects sales growth of approximately 7% and diluted earnings per share of $0.34 to $0.35 in the fourth quarter.
