Whole Foods Market (WFM, Financial) recently reported financial results for the fourth quarter of 2014. Its earnings topped the analyst estimates, while sales were in line with the estimates for the quarter. Its strategic initiatives such as lowering prices and improving loyalty programs accelerated the performance for the quarter.
Whole Foods posted revenue of $3.26 billion, an increase of 9.4% over the same quarter last year. Net income rose 6% to $128 million or earnings of $0.35 per share, compared to $121 million or earnings of $0.32 per share in the corresponding period last year. Analysts had been modeling earnings of $0.32 per share on revenue of $3.26 billion.Â
Good moves
Whole Foods opened 13 new stores during the fourth quarter. Out of these 13 stores, seven were opened in new markets. Whole Foods has opened 38 new stores for the full fiscal year 2014. The company now has 15 million square feet of space across 399 stores in 42 states and three countries.Â
Moreover, the company is seeing great sales momentum in these new stores and expects the momentum to continue growing at a healthy rate. These new stores have generated average weekly sales per store of $503,000, with sales per gross square foot of $722 and productivity level of 83% on the weighted basis for the last eight quarters. Its comp stores less than two years old have produced approximately 15% return on the invested capital, which reflects healthy signs for the company.
The company remains optimistic about its growth initiatives with investment on new and existing stores. It is expected to open another six new stores in the current quarter. Whole Foods is expected to reach the 500-store mark by 2017.
A bright forecast
The company sees demand for approximately 1,200 new stores in the United States in the long run. Whole Foods expects the new stores to occupy sizes ranging from 20,000 to 60,000 square feet. It also plans to open its new stores this year in six new markets such as Ottawa, Canada, while invigorating its brand with new flagships in some of its older markets including Houston, Boston and New York City.
Whole Foods has recently entered into a relationship with Instacart. This partnership will accelerate the company's delivery process. Whole Foods now offers one-hour delivery in 15 major cities across the United States. Whole Foods has seen great responses from its customers so far. In fact, it has seen a tremendous increase in its orders that grew nearly 2.5 times the average order size.
The company remains on track to execute various other programs such as its new loyalty programs and wine club. The company is aggressively expanding its loyalty programs in small cities in Illinois, Indiana, and Florida. Under this program, the company offers a 10% discount for its private-label “365” products. This program will enable the company to create strong connection with the customers and benefit tremendously from their purchase habits and buying trends. A large number of customers have already registered for the programs.
The company is also opening wine bars across its stores. The wine club offers home delivery of high-quality wines from across the world. Whole Foods is the first grocery retailer to open in-store wine bars. Also, the company has launched a new Responsibly Grown rating system that should create a competitive edge over its peers and differentiate its offerings. This rating system assists the company in assessing the quality of the products for its perishable food categories. Products are labeled in the good, better and best categories.Â
In its guidance for fiscal year 2015, Whole Foods expects its sales to grow approximately 9% over 2014. It also expects its same store sales to grow in low to mid-single digits for the year. The analysts are anticipating sales of $15.84 billion for fiscal year 2015.
Conclusion
Whole Foods looks strong with plenty of growth initiatives such as loyalty programs, strong marketing campaign and wine clubs. Also, its new stores continue to generate tremendous sales for the company. Whole Foods also remains on track to open new stores in the new markets that should drive its growth and create value for shareholders in the long run.
