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Market Update : 
Whole Foods Market Q1 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 10:59 AM ET February 22 2010


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We will take our last question from Ed Aaron with RBC Capital Markets. Please go ahead.

Edward Aaron - RBC Capital Markets

Hi. Good afternoon. Thank you for squeezing me in. We first talked just in the past year about vendors maybe shifting in some cases products back down to natural versus organic. Just to bring the price point down, just curious to know how organic is changing, if at all, in terms of your mix of business. And to the extent that organic might still be holding up better than the industry on a relative basis, would you draw any conclusions about the market share trends you might be seeing in term of the share you perhaps gaining and the environment where your competition might have pulled back the last couple of years?

Walter Robb

Organic -- this is Walter. Organic remains a strong part of our business and I think the Trade Association just released new data on the size of the organic industry at $26 billion with a growth rate of 5% to 6%. Our own internal numbers show very clearly that and you can look at the Nielsen numbers too, that organic dollars and units while they’re down from historical double digit results are still well ahead of conventional growth rates.

And, that tells us and we see it in our own data, that organic continues to be a lifestyle choice or a choice that people will continue to make even in the darkest of times. Ant that’s a real -- as you point out, some of the competitors have in fact pulled back from some of that selection and that has been a real positive for us. We continue to be an authentic organic retailer and offer those choices and that’s what the numbers show.

John P. Mackey

One thing we haven’t really talked about, but maybe this is a good place to do it at the close of the call, we are seeing our meat departments right now undergoing an evolution in that. We are selling more and more, for example in beef, we are selling a lot more 100% grass fed organic beef. We are finding that from local sources with high animal welfare standards, we are seeing that garner a larger and larger share.

In that sense in the meat department, we are seeing organic as the category growth. We are seeing, we will be seeing similar things in chicken, in our pork sales and lamb as we get more local, more organic, more 100% grass fed or pasture raised. We are starting to see some good share shifts into that category. In that area at least, organic is definitely, I think is growing Whole Foods and we anticipate it will continue to grow in the future.

Edward Aaron - RBC Capital Markets

Thanks. One follow up if I can on the guidance provision, earnings guidance is coming up about $0.15, about a 200 basis point revision to the comp guidance. That implies just a little bit of a higher marginal profit rate, if you will, than what we have historically thought your business would do on an additional point or two of higher comp. And so I am wondering how to reconcile that and would you attribute the difference to the new store productivity being better and the profitability of those stores being higher than what you might have thought when you first provided your guidance for the year?

Glenda J. Chamberlain

Well, the new store profitability certainly helps, but the operating margins that are implied for the rest of the year are 4.5% to 4.8% which is very much in line with and still below what we have produced historically. So that seems to be a reasonable number.

Edward Aaron - RBC Capital Markets

Okay. Thanks. Well congrats on the quarter and if this momentum continues we will start asking when you will start opening bigger stores again.

John P. Mackey

We expect that to happen.

Glenda J. Chamberlain

Thank you, Ed.

Walter Robb




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