wholefoodsmarket presentation_am08


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wholefoodsmarket presentation_am08

  1. 1. Annual Meeting of Shareholders March 10, 2008 9:00 to 10:30 A.M.
  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 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.
  3. 3. 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
  4. 4. 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”
  5. 5. 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 of our company
  6. 6. Core Value #1 Selling the Highest Quality Natural and Organic Products Available
  7. 7. Our Quality Standards We carefully evaluate each and every product we sell We feature foods that are free of artificial preservatives, colors, Since June 2004, we have only flavors, sweeteners, and hydrogenated fats sold eggs from cage-free hens. We are passionate about great tasting food and the pleasure of In January 2005, sharing it with others our kitchens, bakeries, bake We are committed to foods that are fresh, wholesome and safe to eat houses and commissaries We seek out and promote organically grown foods adopted this standard for our baked goods and We provide food and nutritional products that support health and well- prepared foods. being
  8. 8. Core Value #2 Satisfying and Delighting our Customers
  9. 9. 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
  10. 10. 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
  11. 11. Buying Local We seek out locally grown products that meet our high quality standards We host farmers’ markets in our store parking lots We offer up to $10 million in loans We have made 25 loans totaling over $1 million to growers from 13 states Video clip
  12. 12. Buying Global Our 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
  13. 13. Five-Step Animal Welfare Rating Program Providing customers with a clear and transparent way to make informed buying decisions based solely on No Cages, No Crates animal welfare considerations Step 1: No Cages, No Crates Step 2: Enriched Environment 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
  14. 14. Core Value #3 Supporting Team Member Happiness and Excellence
  15. 15. Our Guiding Principle In 2005, U.S. CEO’s received $411 for every $1 Shared Fate the average worker earned. Open salary information Estimated distribution of stock options outstanding in U.S. as of 2005 Salary cap – 19x Benefits vote by Team Members every All three years Others 25% Gainsharing Top 5 Execs Fully paid health insurance 75% Personal Wellness Accounts 93% of options granted to non- Data Sources: Business Week (1980-2000) Institute for Policy Studies-United for a Fair Economy (2006), Profits with Principles (2004) executives
  16. 16. Happy Team Members Create Happy Shareholders FORTUNE “100 Best” Returns vs. Stock Market 1998-2007 In 2008, we ranked #16 on FORTUNE’S 15% “100 Best 12% Companies to Work For” List 10% 9% We are one of only 14 companies to 6% 6% 5% make the list 100 Best 100 Best S&P Russell since its Reset Buy & 500 3000 inception 11 Yearly Hold 0% years ago Source: Russell Investment Group; Great Place to Work Institute, Inc.
  17. 17. 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. Core Value #4 Creating Wealth through Profits and Growth
  18. 18. 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.
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. 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
  23. 23. We Have Already Made Tremendous Strides Culturally Morale in the stores is higher than we have experienced in any past mergers Operationally Transitioned to Payroll & Benefits plans in January Purchasing & Information systems conversion expected to be completed by end of the second quarter Re-Branding Nine 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
  24. 24. We Signed 28 New Store Leases in 2007 We currently have 88 signed 48% of Existing leases Square Footage 14 new markets 16 22 relocations 14 12 S.F. in millions 51,000 average square feet in 4.5 10 size 8 5.0 3.6 2.6 6 We expect up to 21 new store 1.6 4 openings in FY08 2 9.3 6.4 5.8 4.5 5.1 0 We expect 25 to 30 new store 2003 2004 2005 2006 2007 openings in FY09 Existing In development
  25. 25. We Are Gaining Market Share Five-Year Range Five-Year Low 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.
  26. 26. We Are Producing Consistent Results Five-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.
  27. 27. We Are Delivering Strong Returns # of Average NOPAT Comparable 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%
  28. 28. We Produce Strong Cash Flow EBITANCE Earnings 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
  29. 29. 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
  30. 30. We Are Creating Shareholder Value Dividends Paid Per Share Comparison of Five-Year Cumulative Total Return (Includes reinvestment of dividends) (Stock split adjusted) $2.00 Special $0.69 $0.58 $0.42 $0.23 2004 2005 2006 2007
  31. 31. Core Value #5 Caring About Our Communities and Our Environment
  32. 32. We Care about Our Communities Locally Globally We made charitable donations Our Whole Planet Foundation of just under $15 million or about seeks to create economic 8% of our after-tax profits last partnerships with the poor in year the developing-world communities that supply our On a local basis, we support stores with product thousands of local community events and organizations
  33. 33. 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
  34. 34. 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
  35. 35. We Care about Animal Welfare Non-profit foundation created in 2005 Funding research and sharing best practices around the globe Will transition to Global Animal Partnership, a public foundation Five-Step Animal Welfare Rating
  36. 36. The Best Is Yet to Come Goal Is $12 Billion in Sales in 2010
  37. 37. No Markets Are Saturated We are a desirable tenant that $12 drives traffic to shopping centers $12 21% billion Top markets allow dense $10 CAGR concentration of stores and are Sales in Billions $8 still underserved $6 Lots of opportunity in secondary $6.6 billion markets and internationally $4 Growth is largely “on the books” $2 with 4.6 million square feet in development $0 FY07 2010 Goal
  38. 38. 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
  39. 39. Our Vision Reaches Beyond Food Retailing Our company mission and Core Values are at the center of our business model Our success benefits all of our stakeholders We look forward to sharing and extending our vision with the rest of the world
  40. 40. Annual Meeting of Shareholders ©2008 Whole Foods Market IP, L.P. All rights reserved.
  41. 41. Divided Duties of Chairman & Lead Director Ensure the Protection of Shareholders Lead Director’s Primary Duties: Chairman’s Primary Duties: lead discussions of strategic issues act as a liaison between the CEO and the Board of Directors at the Board level and facilitate communication between meetings act as Chairman of the annual lead the annual performance review of the CEO shareholders’ meeting 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 *Please see our website for more detail
  42. 42. Annual Meeting of Shareholders ©2008 Whole Foods Market IP, L.P. All rights reserved.