Apparently, the recession hasn't stopped some consumers from eating healthy based on Whole Foods Market Inc.'s (NASDAQ:WFMI) second-quarter earnings. The Austin, Texas, purveyor of organic foods eked past analysts' expectations by a penny, reporting Wednesday after market close earnings of 19 cents per share on revenue of $1.9 billion.
"We are very pleased with our second-quarter results, including free cash flow of $98 million. Despite flat sales year over year, we exhibited strong expense control leading to a 10% increase in income from operations excluding noncash asset impairment charges," said John Mackey, chairman, chief executive officer and co-founder of Whole Foods.
The cheery statement could satisfy some for now, but if the recession continues and consumers look to lower costs on food items, things might not look so rosy. This issue is a concern of Whole Foods shareholder Yucaipa Cos., which has accrued a 7% stake in the retailer. Based on Yucaipa's 13D filing
with the Securities and Exchange Commission in January, the firm is prepared to take an activist position that might seek to improve Whole Foods' operations
and its pricing while maintaining its high-quality product offering. The earnings show Mackey may have met Yucaipa's first goal, but not necessarily the second.
Overall, the company earned a profit of $27.3 million, or 19 cents per share, compared to $40.0 million, or 29 cents per share, in the same quarter last year. Consumers pared down their shopping slightly, but amidst these hard times it seems to be a decent result -- especially in light of analysts' expectations.
Additionally, the company has nearly ended its dispute with the Federal Trade Commission over its acquisition of Wild Oats Markets Inc., though it is still awaiting final approval of the resolution that puts 12 Wild Oats stores and one Whole Foods store up for sale in Arizona, Colorado, Connecticut, Missouri, New Mexico, Nevada, Oregon and Utah. Overall, those legal wranglings in the second quarter cost Whole Foods $13.9 million, or 6 cents per diluted share, in legal costs. - Gerald Magpily
See Whole Foods press release
See Dealscape: SEC filing: Burkle has an appetite for Whole Foods
Continue reading below
