Josh Dexter (Soak Bee): If you decided to stop fighting the government and spending $5 million a year for something that in effect is considered valueless by the market, what would happen if you changed your position?
Jim Sud: We can’t get our money back. If we could get money back, we would take it back.
Andrew Wolf (BB&T Capital): Concerning the Leonard Green investment, can they convert that currently at $40 to $50 a share?
Glenda Chamberlain: What we are going to do is put all of the terms on. We know there are a lot of questions about the investment and the term so rather than going through all of those on this call, we’re going to quote out the term sheet, the summary term sheet on our website either tonight or in the morning. Hence everyone will have all their questions answered.
Andrew Wolf (BB&T Capital): Your EPS beat your guidance. What were the sources of this superior performance?
John Mackey: One factor was the strong reduction in G&A percentage, which would have been running high on the year. We invested ahead of our growth to integrate Wild Oats as well as the 20 stores reopened in this fiscal year. We also had a reduction in force to cutback some of our G&A in the quarter. We also had a salary-freeze. Hence, we’ve been trying to manage our G&A number down and we were successful in Q4 with such reductions.
Glenda Chamberlain: Pre-opening was also slightly lower.
Chuck Cerankosky (FTN Midwest): Given the lower sales space especially on the IT side, was strength more of a challenge and was it a significant factor in the lower gross profit margin?
John Mackey: It’s always a challenge of the lower sales. What you’re seeing in the gross margins is because the disciplines are improving and we have made it focus more towards the back half of the year. We are in a certain range where it’s manageable but if it gets down in a serious negative range it becomes more difficult.
Remember we still reported a positive comp in the fourth quarter and so it’s not like there is a huge gap.
Walter Robb: The only place where that shows up more quickly is in the larger stores where stores are a little larger for the sales and then you get to reallocate some of that space to non perishables to make your way through.
Chuck Cerankosky (FTN Midwest): What was the Q4 shrink rate increase versus a year ago?
John Mackey: It would be reflected in our gross margins and we didn’t see we had a little bit softer gross margins in Q4 but they are primarily due to occupancy cost rather than spoilage.
Chuck Cerankosky (FTN Midwest): On the reiteration of the Canadian cash, was that driven by the uncertain economic environment?
Glenda Chamberlain: We have that $60 million of cash, it really wasn’t doing as any good in Canada and it seems like a good time to go ahead and recover it.
Greg Badishkanian (Citigroup): Can you explain and give some detail around how Wild Oats impacted comps for the quarter?
Glenda Chamberlain: They were included in the comps for the final four weeks of the quarter. Additionally, we are not reporting them separately, but they did have a very minor positive effect on comp.
John Mackey: Going forward beginning this first quarter with the whole year now passed in the merger, we are not going to be breaking Wild Oats out separately any longer for comps or for dilution or anything else. They are now completely part of Whole Foods it is been a year and so you won’t see that separate breakout. Wild Oats comps are running above Whole Foods Markets stores and we expect that trend will continue throughout fiscal year probably for the next several years but certainly through fiscal 2009.
Jim Sud: Oats is 15% lower than the Whole Foods basket size. The opportunity is to really grow comps through the basket size as well.
Ed Aaron (RBC Capital): On the lease flexibility situation, recognizing that you have obligations and you can’t get out of every lease that you might want, are there any stores in the pipeline that you don’t think are going to meet your internal EVA hurdles?
John Mackey: Are there any stores that are in development that are not going to meet seven year EVA hurdle? Yes, there probably are few that are in that case, but great majority of the stores that we still have left are expected to hit a seven year EVA target. We are certainly not going to give specific information about those particular stores. In addition we’re hoping that in some case we may still downsize those stores or we may open them in slightly smallest square footage and keep additional square footage for expansion later on in more normalized economic times.
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