wholefoodsmarket presentation_AM07


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wholefoodsmarket presentation_AM07

  1. 1. 2007 Annual Meeting of Shareholders
  2. 2. Safe Harbor Statement The following constitutes a quot;Safe Harborquot; 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 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 24, 2006. In addition to those risks, there are risks and uncertainties associated with the tender offer made by the Company for Wild Oats Markets’ common stock. Those risks include risks that the transaction will not be consummated on the terms or timeline first announced. Further information concerning those risks are included in the Company’s filings with the SEC in response to the tender offer. The Company does not undertake any obligation to update forward-looking statements.
  3. 3. • World’s leading natural & organic foods supermarket • 31% CAGR in sales since IPO • Fiscal 2006 sales of $5.6 billion • Currently 192 stores in 32 states, Canada, & U.K. • 42,000 Team Members • Member of S&P 500 and Nasdaq-100 indices • #449 of the Fortune 500 • 5th most valuable U.S. public food retailer after Wal-mart, Kroger, Safeway & Supervalu
  4. 4. 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, shareholders, vendors, 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 of our company.
  5. 5. 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”
  6. 6. selling the highest quality natural & organic products available Core Value #1 We define quality by evaluating the ingredients, freshness, safety, taste, nutritive value and appearance of all of the products we carry. We appreciate and celebrate the difference natural and organic products can make in the quality of one's life.
  7. 7. our Quality Standards • 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
  8. 8. satisfying & delighting our customers Core Value #2 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!
  9. 9. Austin 1980 Where it All Began
  10. 10. the latest generation Food Venues
  11. 11. the latest generation Big Wine
  12. 12. the latest generation Talking Stores
  13. 13. the latest generation Talking Stores
  14. 14. the latest generation Talking Stores
  15. 15. Whole Foods Market our pile on the flavor, Private Brand not the additives Opportunity • We are the strongest brand with our customers • As of 1Q07: – 1900 SKUs – 17% of grocery & Whole Body sales • We expect private label to grow to a much higher percentage of our sales over time
  16. 16. our Whole Trade Guarantee Ensures a premium price to producers. Provides higher wages and better working conditions for workers. Promotes a more sustainable environment. Meets our high quality standards. • Whole Trade Elements: Quality, Price, Labor & Environment • Launching in late March • Partnering with leading environmental and labor equity certifying agencies
  17. 17. supporting Team Member 2007 World’s leading excellence happiness & natural & organic foods supermarket Core Value #3 •Fiscal 2006 sales of $5.6 billion •Currently 19x stores in 31 states, strive to create anU.K. We Canada, and the •xx,000 Team Members empowered work environment •Member of S&P 500 and that celebrates success and sees NASDAQ-100 Indices •#449 of as an opportunity failure the Fortune 500 for growth. •5th most valuable U.S. public food retailer after Wal- Mart, Kroger, Safeway & SuperValu sets us apart. Our culture
  18. 18. Estimated distribution of our options outstanding as of 2007 2005 in the U.S. Guiding Principle World’s leading natural & organic foods supermarket of Shared Fate All •Fiscal 2006 sales of $5.6 Others billion 25% •Currently salary information • Open 19x stores in 31 states, Canada, and the U.K. • Salary cap – 19x •xx,000 Team Members Top 5 •Member of options granted to • 94% of S&P 500 and Execs non-executives 75% NASDAQ-100 Indices • Gainsharing •#449 of the Fortune 500 •5th Benefits vote by Team • most valuable U.S. Members every three years public food retailer after Wal- In 2004, U.S. CEOs Mart, Kroger, Safeway & • Fully paid health insurance received $431 for every SuperValu • Personal Wellness Accounts $1 the average worker earned. Data Sources: Business Week (1980-2000) Institute for Policy Studies-United for a Fair Economy (2004), Profits with Principles
  19. 19. Happy Team Members create Happy Shareholders Fortune quot;100 Best“ Returns vs. Stock Market 1998-2005 15% 14.2% • #5 in 2007 10% 10.7% • highest ranking ever • 10 years in a row 100 100 6.0% 6.3% 5% • 1 of only 18 Best Best S&P Russell Buy & Reset companies to make list 500 3000 Hold Yearly since its inception 0% Source: Russell Investment Group
  20. 20. creating wealth through profits & growth Core Value #4 Growth Since IPO 9/24/06 9/29/91 CAGR Number of Stores 186 10 22% Sales $5.6 B $92.5 M 31% Earnings per Share $1.41 $0.08 21% Team Members 41,500 1,100 27% Stock Price $59.29 $2.13 25% *Stock price & EPS are split-adjusted.
  21. 21. 2006 Another Great Year • 19% sales growth • 11% comp store sales growth – 3rd consecutive year of double-digit increase • Opened 13 new stores • Entered four new markets • $899 sales per square foot • $39 million improvement in EVA • Implemented our 3rd stock split
  22. 22. Dividends Declared we produce Per Share (stock split adjusted) Consistent Cash Flow $2.00 Special In FY06, we: • Produced $453 million in cash from operations • Received $222 million in stock option proceeds • Invested $340 million in capital expenditures $0.60 $0.47 • Paid $358 million in dividends $0.30 • Declared our fourth dividend 2004 2005 2006 increase post Q4 • Repurchased $100 million of stock Subject to capital availability and a • Ended the year with $256 million determination that cash dividends continue to be in the best interest of our in cash and investments shareholders, it is the intention of the Board of Directors to continue to pay a quarterly dividend.
  23. 23. we are Gaining Market Share 5-Yr Range 5-Year 1Q07 Low High Average Sales Growth 17% 23% 20% 12% Comp Store Sales Growth 8.6% 14.9% 11.5% 7.0% Two-Year Comps* 18.6% 27.8% 22.7% 20.0% YOY Square Footage Growth 10% 14% 12% 9% *Sum of two years.
  24. 24. we are producing Consistent Results 5-Yr Range 5-Year 1Q07 Low High Average Gross Profit 34.2% 35.1% 34.8% 34.3% Direct Store Expenses 25.2% 25.5% 25.4% 25.8% Store Contribution 9.0% 9.6% 9.4% 8.4% G&A 3.1% 3.6% 3.2% 3.0%
  25. 25. we are delivering Strong Returns Total Square Avg. NOPAT Comparable Stores (1Q07) Feet Comps ROIC* Over 11 years old 1,366,400 3.8% 77% Between 8 and 11 years old 953,800 4.6% 65% Between 5 and 8 years old 1,349,000 6.5% 40% Between 2 and 5 years old 1,417,500 9.3% 25% Less than 2 years old (incl. relos) 1,022,200 15.2% 4% All Comparable stores 6,108,900 7.0% 35% All Stores 6,581,300 31% *Includes pre-opening expense.
  26. 26. we produce Consistent Cash Flow In 1Q07, we: • Increased operating cash flow per share 30% to $0.79 • Produced $112 million in cash from operations • Received $29 million in stock option proceeds • Invested $153 million in capital expenditures • Paid $21 million in dividends • Ended the quarter with $222 million in cash and investments and long-term debt of $3 million
  27. 27. we are Accelerating Our Square Footage Expected to Nearly Double New Store Growth Over the Next Four Years • We have built a record 12 pipeline 77% of • We expect new store 10 Existing S.F. openings to accelerate in S.F. in millions 8 FY07 and be incrementally 5.0 higher in FY08 3.6 6 2.6 • We have been building 1.6 0.9 4 infrastructure at the regional & national levels 2 • We currently have 11 6.4 4.1 4.5 5.1 5.8 0 operating regions that are 2002 2003 2004 2005 2006 each responsible for designing, opening and Existing In development staffing stores
  28. 28. temporary side effects of Accelerating Growth • We expect 2007 capital expenditures in the range of $525 million to $575 million • We expect total pre-opening and relocation costs for FY07 of $68 million to $74 million • We expect pre-opening and relocation costs to significantly impact our fiscal year 2007 diluted earnings per share growth • Our guidance excludes any impact from the pending merger with Wild Oats Markets
  29. 29. wild News We are Just About Wild Oats Markets Merger About Wild Oats: • A leading natural and organic foods retailer in the U.S. • Annual sales of approximately $1.2 billion • Operates 110 stores in 24 states and Canada under the following banners: – Wild Oats Marketplace (nationwide) – Henry’s Farmers Markets (Southern California) – Sun Harvest (Texas) – Capers Community Market (B.C.) • Shares similar mission, core values and quality standards
  30. 30. creating a stronger company Better Able to Compete • Tender offer of $18.50 per share in cash • Transaction to be funded at closing with $700 million of senior term loans; we also intend to upsize our long-term senior revolving credit facility to $250 million • Expected to close in April • We will evaluate each banner and store to see how it fits into our brand and real estate strategy • All of our 11 operating regions will gain stores, three of our smallest regions gaining critical mass, and we will gain immediate entry into a significant number of new markets • We expect to recognize significant synergies through G&A cost reductions, greater purchasing power, increased utilization of support facilities and new Team Member talent • Integrating acquisitions is a core competency
  31. 31. we are creating Long-Term Shareholder Value Comparison of 5-Year Cumulative Total Return Includes Reinvestment of Dividends 500% 400% 300% 200% 100% 0% 2001 2002 2003 2004 2005 2006 WFMI NASDAQ Composite S&P Food Retail
  32. 32. caring about $12 Million our communities (6% After-Tax Profits) & our environment in Charitable Contributions Core Value #5 10% to WFM Global We recognize our responsibility to Foundations be an active participant and supporter of our local communities. 90% Given We seek to balance our needs as a business with the needs Locally of our planet.
  33. 33. we support Our Local Growers • In 2006, we sold $163 million of produce from local growers • Promoting local sourcing of product through providing loans to small, local farmers, ranchers and manufacturers • Hosting local farmers markets at many of our stand-alone store locations • Local beyond produce
  34. 34. we are leaders in 2007 Environmental World’s leading natural & organic foods supermarket Stewardship •Fiscal 2006 sales of $5.6 billion We are the only •Currently 19x stores in 31 states, Canada,companyU.K. Fortune 500 and the to •xx,000 Team Members purchase sufficient wind •Member of S&P 500 and energy credits to offset NASDAQ-100 Indices •#449 ofof itsFortune 500 100% the electricity use. •5th most valuable U.S. public food retailer after Wal- We received the Mart, Kroger, Safeway & EPA’s Green Power Partner SuperValu of the Year award.
  35. 35. we Think & Act Green • Making decisions for our stores, offices and non-retail facilities that positively impact the health of our planet and local communities • Green Mission Task Force • National Energy Manager • Grass roots efforts across our company
  36. 36. our 2007 Animal Compassion World’s leading natural & organic foods supermarket Foundation •Fiscal 2006 sales of $5.6 billion Our mission is to improve the •Currently 19x stores in 31 quality of life of farm animals states, Canada, and the U.K. by helping farmers achieve a •xx,000 Team Members higher standard of animal •Member of S&P 500 and welfare excellence. NASDAQ-100 Indices •#449 of the Fortune 500 Initially funded by •5th most valuable U.S. public Global 5% Day. Wal- food retailer after Mart, Kroger, forward, & Going Safeway SuperValu Whole Foods Market will donate $1 million annually.
  37. 37. our Whole Planet Foundation Our Mission is to create economic partnerships with the poor in those developing-world communities that supply our stores with product. Through innovative assistance for entrepreneurship — including direct micro-credit loans and tangible support for other community partnership projects — we seek to unleash the energy and creativity of every human being we work with in order to create wealth and prosperity in emerging economies.
  38. 38. our Whole Planet Foundation • Initially funded through a Global 5% Day, Whole Foods Market will donate $1 million annually • Accomplishments to date: – Since Spring 2006, we have loaned $297,092 to 1,474 women in Costa Rica, with a 100% repayment rate – Since Spring 2006, we have loaned $186,834 to 1,217 women in Guatemala, with a 100% repayment rate – In 2007, we are expanding into Honduras, Nicaragua and India
  39. 39. we have our goal is Tremendous Growth $12 BILLION IN SALES IN 2010 Opportunities • We are a desirable tenant $12 21% that drives traffic to shopping $12 CAGR bil centers $10 • No markets are saturated Sales in Billions $8 • Top markets allow dense concentration of stores and $6 are still underserved $5.6 • Lots of opportunity in $4 bil secondary markets • International expansion $2 $0 FY06 2010 Goal
  40. 40. Coming to London in June
  41. 41. the best 2007 Is Yet World’s leading natural & to Come organic foods supermarket •Fiscal 2006 sales of $5.6 billion are the authentic retailer • We •Currently 19x stores in products of natural & organic 31 states, Canada, and the U.K. • We are continually redefining •xx,000 Team Members the marketplace and further •Member of S&P 500 and differentiating our stores and NASDAQ-100 Indices customer experience •#449 of the Fortune 500 • We believe our sales potential •5th most valuable U.S. publicmuch retailer after Wal- is food greater than $12 Mart, Kroger, the market billion, as Safeway & SuperValu to grow and we continues continue to improve
  42. 42. our vision 2007 Reaches Beyond World’s leading natural & organic foods supermarket Food Retailing •Fiscal 2006 sales of $5.6 billion Our company mission & •Currently 19x stores in 31 core values are at states, Canada, and the U.K. the center of our •xx,000 Team Members business model •Member of S&P 500 and NASDAQ-100 Indices Our success benefits all •#449 of the Fortune 500 of our stakeholders •5th most valuable U.S. public food retailer after Wal- Mart,look forward to sharing We Kroger, Safeway & &SuperValu our vision with the extending rest of the world