wholefoodsmarket presentation_am08
DESCRIPTION
TRANSCRIPT
March 10, 2008
9:00 to 10:30 A.M.
Annual Meeting of Shareholders
The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this presentation are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward-looking statements.
These risks include but are not limited to general business conditions, the timely development and opening of new stores, the successful integration of acquired businesses into our operations, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10-K for the fiscal year ended September 30, 2007.
The Company does not undertake any obligation to update forward-looking statements.
Safe Harbor Statement
World’s leading natural & organic foods supermarket
30% CAGR in sales since IPO
Fiscal 2007 sales of $6.6 billion
Currently 271 stores in 37 states and the District of Columbia, Canada, and U.K.
53,000 Team Members
Member of S&P 500 and NASDAQ-100 indices
#411 of the Fortune 500
5th most valuable U.S. public food retailer after Wal-Mart, Kroger, Safeway and SUPERVALU
We’re about More than Just Food
We are a mission-driven company, and that is important to our customers
We are the authentic retailer of natural & organic products
We are a lifestyle brand
We have created a unique environment that functions as a “third place”
Our Stakeholder Philosophy
Our “bottom line” ultimately depends on our ability to satisfy all of our stakeholders
Our goal is to balance the needs and desires of our customers, Team Members, investors, suppliers, communities and the environment while creating value for all
By growing the collective pie, we create larger slices for all of our stakeholders
Our Core Values reflect this sense of collective fate and are the soul ofour company
Selling the Highest Quality Natural and Organic Products Available
Core Value #1
Our Quality Standards
Since June 2004, we have only sold eggs from cage-free hens.
In January 2005, our kitchens, bakeries, bake houses and commissariesadopted this standard for our baked goods and prepared foods.
We carefully evaluate each and every product we sell
We feature foods that are free of artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats
We are passionate about great tasting food and the pleasure of sharing it with others
We are committed to foods that are fresh, wholesome and safe to eat
We seek out and promote organically grown foods
We provide food and nutritional products that support health and well-being
Satisfying and Delighting our Customers
Core Value #2
Experiment, Innovate, Improve!
Only by satisfying our customers’needs first, do we have the opportunity to satisfy the needs of our other stakeholders
We do all we can to make food shopping fun!
We offer a differentiated shopping experience
Private Label Opportunity
We are the strongest brand with our customers
As of 1Q08:
2,200 SKUs
19% of grocery & Whole Body sales
We expect private label to grow to a much higher percentage of our sales over time
Buying Local
We seek out locally grown products that meet our high quality standardsWe host farmers’ markets in our store parking lotsWe offer up to $10 million in loans
We have made 25 loans totaling over $1 million to growers from 13 statesVideo clip
Buying GlobalOur Whole Trade Guarantee:
Exceptional product quality
More money for producers
Better wages and working conditions
Sound environmental production practices
Support for eliminating poverty
Currently over 600 items
Our goal is to have over 50% of our imported products from developing countries under Whole Trade label within 10 years
Five-Step Animal Welfare Rating Program
Providing customers with a clear and transparent way to make informed buying decisions based solely on animal welfare considerations
Step 1: No Cages, No Crates
Step 2: Enriched Environment
Step 3: Pasture Based
Step 4: No Mutilations
Step 5: On-Farm Birth & Slaughter
Launched in the U.K. with plans to launch in the U.S. this summer
Enriched Environment
No Cages, No Crates
Supporting Team Member Happiness and Excellence
Core Value #3
Our Guiding Principle
Open salary information
Salary cap – 19x
Benefits vote by Team Members every three years
Gainsharing
Fully paid health insurance
Personal Wellness Accounts
93% of options granted to non-executives
Estimated distribution of stock options outstanding in U.S. as of 2005
Shared Fate In 2005, U.S. CEO’s received $411 for every $1 the average worker earned.
All Others25%
Top 5 Execs75%
Data Sources: Business Week (1980-2000) Institute for Policy Studies-United for a Fair Economy (2006), Profits with Principles (2004)
Happy Team Members Create Happy Shareholders
In 2008, we ranked #16 on FORTUNE’S “100 Best Companies to Work For” List
We are one of only 14 companies to make the list since its inception 11 years ago
FORTUNE “100 Best” Returns vs. Stock Market 1998-2007
Source: Russell Investment Group; Great Place to Work Institute, Inc.
0%
5%
10%
15%
100 BestResetYearly
100 BestBuy &Hold
Russell3000
9%
6% 6%
12%
S&P500
Creating Wealth through Profits and Growth
Core Value #4
Growth Since IPO
9/30/07 9/29/91 CAGR
NUMBER OF STORES 276 10 23%SALES $6.6 B $92.5 M 30%EARNINGS PER SHARE $1.29 $0.08 18%TEAM MEMBERS 52,600 1,100 27%STOCK PRICE $48.96 $2.13 22%
*1991 Results do not include the impact of subsequent pooling transactions and accounting restatements. Stock price is split-adjusted IPO price in January 1992.
We Stepped Up Our Growth in 2007
15% sales growth
7% comp store sales growth
Average weekly sales per store were $632,000*
Sales per square foot were $923*
We opened a record 21 new stores
We merged with Wild Oats
We signed 28 new leases
*Excludes acquired Wild Oats stores.
We Debuted in London
We have hired a VP of Real Estate
We hope to have additional sites to announce in the U.K. in the near future
We Revitalized Our Brand in Chicago
We opened four new stores this year
In 2009, we plan to relocate our highly successful 36,000 square foot Lincoln Park store to an 80,000 square foot store
We Opened Our Fourth Store in NYC
We will open our fifth store in Tribeca this summer
We have a sixth store in development on the Upper West Side
We also have sites in development in Brooklyn, Yonkers and Long Island
We Completed the Wild Oats Merger
We gained immediate entry into 15 new markets and five new states
All 11 operating regions gained stores, with our three smallest regions benefiting the most
We believe this merger will create long-term value for all of our stakeholders
We Have Already Made Tremendous Strides
CulturallyMorale in the stores is higher than we have experienced in any past mergers
OperationallyTransitioned to Payroll & Benefits plans in JanuaryPurchasing & Information systems conversion expected to be completed by end of the second quarter
Re-BrandingNine stores to date with goal of all stores by year end
We have made up-front investments in advance of what we expect to be significant long-term improvements in sales and earnings
We Signed 28 New Store Leases in 2007
We currently have 88 signed leases
14 new markets
22 relocations
51,000 average square feet in size
We expect up to 21 new store openings in FY08
We expect 25 to 30 new store openings in FY09
1.6
4.5 5.1 5.8 6.4 9.3
2.63.6 5.0
4.5
0
2
4
6
8
10
12
14
16
2003 2004 2005 2006 2007
S.F.
in m
illio
nsExisting In development
48% of Existing Square Footage
We Are Gaining Market Share
Five-Year Range Five-YearLow High Average 1Q08
SALES GROWTH 13.2% 22.8% 18.8% 18.6%
COMP STORE SALES GROWTH 7.1% 14.9% 10.9% 9.3%
TWO-YEAR COMPS 18.1% 27.8% 22.3% 16.3%
ENDING SQUARE FOOTAGE GROWTH 10% 18% 13% 19%
*Excludes acquired Wild Oats stores.
We Are Producing Consistent ResultsFive-Year Range Five-Year
Low High Average 1Q08
GROSS PROFIT 34.2% 35.1% 34.8% 34.1%DIRECT STORE EXPENSES 25.2% 26.0% 25.6% 26.2%STORE CONTRIBUTION 8.9% 9.6% 9.3% 8.0%G&A 3.1% 3.2% 3.2% 3.4%
% OF SALES – Identical stores 89% 91% 90% 87%
% OF SALES – New & relocated stores 7% 9% 8% 11%
*Excludes acquired Wild Oats stores.
We Are Delivering Strong Returns
# of Average NOPATComparable Stores (1Q08) Stores Size Comps ROIC
Over 11 years old 64 28,300 5.4% 78%Between 8 and 11 years old 28 33,400 4.0% 55%Between 5 and 8 years old 41 33,900 8.3% 41%Between 2 and 5 years old 41 44,600 11.7% 22%Less than 2 years old (incl. 5 relos) 15 58,100 37.7% -2%
All comparable stores (7.6 yrs. old) 189 36,200 9.3% 34%All identical stores (7.9 yrs. old) 184 35,400 7.1% 38%All stores excluding Oats (6.7 yrs. old) 208 37,800 26%
We Produce Strong Cash Flow
EBITANCEEarnings before interest, taxes and non-cash expenses
We believe EBITANCE better reflects the current accounting reality of significant non-cash expenses beyond depreciation and amortization such as share-based compensation, deferred rent and LIFO
For 1Q08: Cash flow from operations was $70 million
EBITANCE was $167.5 million or $1.19 per diluted share, a 15% increase over the prior year
Goals for Fiscal Year 2008
Sales growth of 25% to 30%
Comparable store sales growth of 7.5% to 9.5%
Open up to 21 new stores
Do not expect to produce operating leverage primarily due to:a decrease in store contribution from a higher percentage of sales from new and acquired stores
investments in labor and benefits at Wild Oats stores
flat G&A as a percentage of sales year over year
We Are Creating Shareholder Value
Comparison of Five-Year Cumulative Total Return(Includes reinvestment of dividends)
Dividends Paid Per Share(Stock split adjusted)
$0.23
$0.58
$2.00Special
$0.42
2005
$0.69
2004 2006 2007
Caring About Our Communities and Our Environment
Core Value #5
We Care about Our Communities
We made charitable donations of just under $15 million or about 8% of our after-tax profits last year
On a local basis, we support thousands of local community events and organizations
Our Whole Planet Foundation seeks to create economic partnerships with the poor in the developing-world communities that supply our stores with product
Locally Globally
Changing the lives of over 75,000 people through micro-credit
Committed $6 million in micro-lending projects to date and $3.2 million in loans
Supporting 15,000 small home-based businesses
Video clip
We Care about the Environment
Support organic, local, and sustainable agriculture and sustainable seafood
Commitment to recycling and alternative energy
Better bags
Green Mission
Green Building
Distribution efforts
We Care about Animal Welfare
Non-profit foundation created in 2005Funding research and sharing best practices around the globeWill transition to Global Animal Partnership, a public foundation Five-Step Animal Welfare Rating
Goal Is $12 Billion in Sales in 2010
The Best Is Yet to Come
No Markets Are Saturated
We are a desirable tenant that drives traffic to shopping centers
Top markets allow dense concentration of stores and are still underserved
Lots of opportunity in secondary markets and internationally
Growth is largely “on the books”with 4.6 million square feet in development $0
$2
$4
$6
$8
$10
$12
FY07 2010 Goal
Sale
s in
Bill
ions
$6.6billion
$12billion
21%CAGR
We Are Investing in Our Future Growth
We believe that over the long term we will continue to deliver healthy earnings growth through strong sales growth rather than through significant operating leverage
We believe the investments we are making today in our new, acquired, and existing stores will result in substantial sales and earnings growth in the near future
We believe our sales potential is much greater than $12 billion, as the market continues to grow and we continue to improve
Our Vision Reaches Beyond Food Retailing
Our company mission and Core Values are at the center of our business modelOur success benefits all of our stakeholdersWe look forward to sharing and extending our vision with the rest of the world
©2008 Whole Foods Market IP, L.P. All rights reserved.
Annual Meeting of Shareholders
Divided Duties of Chairman & Lead Director Ensure the Protection of Shareholders
lead discussions of strategic issues at the Board level
act as Chairman of the annual shareholders’ meeting
act as a liaison between the CEO and the Board of Directors and facilitate communication between meetings
lead the annual performance review of the CEO
lead the Board of Directors in an annual review of the performance and effectiveness of the Board and its committees
facilitate the Board of Directors’ input into the agenda for the Board meetings and work with the Chairman to set the agenda for each meeting
act as chair of regular and special meetings of the Board of Directors
act as chair of the executive sessions of the independent directors
Chairman’s Primary Duties: Lead Director’s Primary Duties:
*Please see our website for more detail
©2008 Whole Foods Market IP, L.P. All rights reserved.
Annual Meeting of Shareholders