This summary is based on the first quarter fiscal 2008 earnings call conducted by Whole Foods Market Inc. (WFMI: chart) on February 19, 2008.

Management:

- Chairman and CEO: John Mackey
- Co-President and COO: Walter Robb
- Co-President and COO: A.C. Gallo
- EVP and CFO: Glenda Chamberlain
- EVP, Growth and Business Development: Jim Sud
- EVP, Global Support: Lee Valkenaar
- VP, IR: Cindy McCainn

Key Investors Issues

- Sales were up 31% to $2.5 billion from $1.87 billion in the prior year.
- Net income was down 27% to $39.1 million or 28 cents a share.
- Cash dividends amounting to $25 million were paid out to shareholders.

First Quarter Highlights

Total sales increased 31% to $2.5 billion from $1.87 billion in the prior year and excluding Wild Oats increased 18.6% to $2.2 billion, driven by 19% ending square footage growth and 9.3% comparable store sales growth.

- Identical store sales which exclude five relocated stores and three major expansions increased 7.1% on top of the 6.2% increase last year.
- Account breakout is roughly in line with the historical 60% to 40% split between the increases in transaction count and basket size.
- Average transactions per week increased to 5% to $3.5 million and the average basket size increased 4% to $36 due to an increase in the average price per item as has been the case over the last six quarters.
- Average weekly sales per store excluding Wild Oats increased 8.4% to $672,000 translating sales per square foot of $930.

The firm continued to expand the product label offerings, SKU accounts increased 15% year-over-year to just over 2200 SKUs, and currently represent 19% of total grocery and whole body sales.

- The firm opened six new stores, including a 49,000 square store at Napa, next door to the Trader Joe''s.
- It has successfully implemented a very aggressive and well communicated competitive strategy with price matching and valued at every term.
- The Napa store has only been open for one month but is producing very strong sales per square foot and gross margin.
- New and relocated stores average 57,000 square feet in size and were just over six months old.

It produced average weekly sales of $694,000 translating sales per square foot of $630.

- The new and relocated stores open at least one year, continue to run ahead of sales projections for the first year, and are on track to reach the real estate investment hurdle rate of cumulatively positive EVA within seven years or less.
- For stores in the ident base, which average 7.9 years of age and 35,400 square feet in size, gross profit improved 42 basis point and direct store expenses improved 45 basis points resulting in an 88 basis point increase in store contribution.
- G&A expenses increased 41 basis points to 3.4% of sales, primarily due to an increase in legal and professional fees, along with an increase in wages at the regional and global offices.

Net income was $39.1 million or 28 cents a share, down 27.3% from $53.8 million or 38 cents a share due to an increase in direct store expenses and interest charges.

- The company produced $70 million in cash flow from operations and received $7 million in proceeds from the exercise of stock options.
- Capital expenditures were $162 million of which $102 million related to new stores and $6 million related to Wild Oats.
- In addition, the Company paid $25 million in cash dividends to shareholders and had total debt of $773 million, including $30 million drawn on its $250 million credit line.
- Currently, the firm has $50 million drawn on its line, leaving $114 million available net of outstanding letters of credit and the credit agreement contains an accordion feature under which the firm can increase its credit line up to $350 million.

Impact of Wild Oats:

- Sales of Wild Oats were $239 million or 9.7% of total sales and the firm closed 12 stores, including a remodel that will be reopened later this year.
- The continuing stores averaging 24,000 square feet in size and 9.4 years of age had average weekly sales per store of $230,000, sales per square foot of $495 and store contribution of $7.9 million or 3.5% of sales.
- The negative impact of Wild Oats on total results was $20 million pretax, of which $12.7 million related to interest expense and amortization of intangibles, $2.8 million related to losses of the closed locations, $2.4 million related to accretion of the store closure reserve and other store closure cost.

The firm expects some additional store losses related to the closing of up to three additional Wild Oat stores, in connection with nearby Whole Foods Market stores opening in the second half of the fiscal year 2008.

- However, the headcount at the Boulder home office has already decreased from 87 at the end of the first quarter to 56 currently.
- The firm is making upfront investments to raise the Wild Oat stores up to the high standards including investments and repairs and maintenance of the stores, lower prices and expanded perishables offering and increased labor.
- The firm is encouraged that the remaining stores are producing positive store contribution and expect to see continuous improvement as it moves further along in the integration process.

The firm began to transition in human resources and information technology, and transitioned all the Wild Oats team members to its payroll and benefits plans, and converted 23 of the 62 Wild Oats stores for purchasing and information system.

- Since then another 23 stores have converted, and the firm expects the remaining stores to convert by the end of the second quarter.
- The systems'' conversion is critical to managing inventory, pricing and merchandising programs in the stores.
- Once converted, store leadership is empowered and can work together to improve the financial performance of the stores.
- Towards the end of the first quarter, the firm rebranded five stores in Raintree, Arizona; Long Beach, California; West Hartford Connecticut; West Port, Connecticut, and Andover Massachusetts.