FOR IMMEDIATE RELEASE Thursday, October 26, 2000
WILD OATS MARKETS, INC.
REPORTS THIRD QUARTER RESULTS;
EXPANDS STRATEGIC REPOSITIONING;
COMMENTS ON REVENUES AND EARNINGS EXPECTATIONS FOR BALANCE OF
2000 AND OUTLOOK THROUGH 2002
The Company will host a conference call to discuss this press release on October
26, 2000 at 3:00 p.m. Mountain Time ("MT"). To access the call, dial (212)
231-6007, reservation #16401423. An audio webcast will also be simultaneously
available through a link on the Company's website www.wildoats.com and may also
be accessed directly at http://www.vcall.com/NASApp/VCall/EventPage?ID=49402. A
recorded version of the call will also be available until 8:00 p.m. MT on
Thursday, October 26th, from 8:00 a.m. to 8:00 p.m. MT on Friday October 27th
and from 8:00 a.m. to 8:00 p.m. MT on Monday, October 30th by calling (800)
633-8284 from within the U.S. or (858) 812-6440 from outside the U.S. and
referencing the reservation # above.
BOULDER, CO - Wild Oats Markets, Inc. ("Wild Oats" or the "Company") today
reported financial performance for its third quarter and provided comments on
future revenue and earnings expectations.
Financial Results
Wild Oats reported that its sales for the third quarter of 2000 were $207.2
million, an increase of 11% over sales of $186.5 million for the same period in
1999. Sales for the nine months then ended were $631.2 million, an increase of
22% over sales of $519.4 million in the same period in 1999. The sales increases
are due primarily to the opening or relocation of 12 stores and the acquisition
of two stores in the first nine months of 2000, as well as the acquisition of 17
stores during the 1999 fiscal year. During the third quarter, the Company opened
four stores in Portland, Oregon, Cincinnati and Cleveland, Ohio and Laguna
Niguel, California. Comparable store sales decreased (3%) for the third quarter
of 2000 and (2%) for the nine months then ended.
Net income and diluted earnings per share reported below are exclusive of
merger, restructuring and other non-recurring charges reported in previous
quarters. Net income for the third quarter of 2000 was $1.1 million compared to
$4.5 million in the same period in 1999. Net income for the nine months then
ended, was $11.0 million compared to $12.9 million in the same period in 1999.
Diluted earnings per share for the third quarter of 2000 were $0.05 compared to
$0.19 per share in the same period in 1999. Diluted earnings per share for the
nine months then ended were $0.47 compared to $0.55 in the same period in 1999.
The declines in net income are primarily due to acquisition integration
difficulties resulting from a very rapid pace of acquisitions in 1999 (during
which the Company acquired or merged with 41 stores through both pooling and
purchase transactions), a more challenging competitive environment, and delays
in the Company's extensive store remodeling program.
Business Outlook
"Over the last several months, we've conducted a further evaluation of the
competitive nature of our business. From the recent research, it has become
clear that a more extensive repositioning than the initial plan we announced
last May is required," CEO Mike Gilliland said. "Our recent experiences in new
store openings where we incorporated many of the store features and
repositioning initiatives that we developed earlier this year convinced us that
in order to restore positive comparable store sales increases and improve our
store productivity and profitability, we would have to expand our repositioning
program to invest in our existing store operations, including expanded marketing
and promotional programs as well as greater levels of customer service. These
investments will require increased staffing levels and better employee training.
To properly implement these programs, we will need to slow our store opening and
acquisition schedule to focus more intensely on existing store operations and
close or sell those stores that, in our view, would not generate satisfactory
<PAGE>
returns. We have identified as many as eight additional stores which do not meet
the Company's financial and/or strategic objectives. These stores will be slated
for sale or closure and, as a result, in the fourth quarter of this year the
Company expects to recognize additional restructuring charges of approximately
$14 million to $15 million after tax, which are attributable primarily to the
write-off of the fixed and intangible assets and lease obligations of these
stores.
"As a result of the investments described above, we have revised our operating
plan and now expect that our revenues for the year 2000 will approximate a 15%
increase over 1999. For 2001, our projected internal revenue growth is expected
to be 10%-12%, which, after accounting for the loss of revenues from planned
store closures and/or sales, will net to 3%-5% consolidated revenue growth. This
revised revenue outlook, along with expenses related to increased training and
development of personnel, pricing and promotional programs, and marketing
initiatives, will have an impact on our profits. We now anticipate diluted
earnings per share to be approximately $0.50 to $0.55 for 2000, exclusive of
restructuring charges recorded in 2000, and to be approximately $0.30 to $0.35
for 2001.
"Following the completion of the strategic repositioning next year, in 2002 we
believe that Wild Oats will return to the revenue growth rates we targeted for
the business when we announced our repositioning in May, with earnings per share
growth outpacing revenue growth," he said.
The Company currently has 17 sites (13 new stores and four relocations),
averaging approximately 26,000 square feet, in development. Two of those sites
are expected to open in the fourth quarter of 2000, for a total of 11 new and
three relocated stores in 2000. The Company currently plans as many as seven new
and four relocated stores in 2001 and has already located four sites for
projected openings in 2002.
The comments regarding the future financial performance in the immediately
preceding three paragraphs constitute forward-looking statements and are made in
express reliance on the safe harbor provisions contained in Section 21E of the
Securities Exchange Act of 1934. This information, as well as other
forward-looking information provided should be read in conjunction with the
information under the caption "Business Risks" below.
Business Risks
Except for the historical information contained herein, this news release
contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements include the number, timing and location of stores
that the Company plans to open, relocate, sell or close in the future, expected
future revenues and earnings per share, and the future financial measures and
the prospects for favorable growth and performance as a result of the Company's
restructuring initiatives and strategic plan.
The statements made by the Company are based on management's present
expectations and actual results may differ from the results indicated or
otherwise implied by such forward-looking statements due to certain risks and
uncertainties including, but not limited to, the availability and integration of
acquisitions, the timing and execution of new store openings, relocations,
remodels, sales or closures, the timing and amount of the restructuring charges
described above, the timing and impact of promotional and advertising campaigns,
the impact of competition, changes in product supply, changes in management
information needs, changes in customer needs and expectations, governmental and
regulatory actions, customer reaction to the Company's strategic plan and
revised store formats, and general industry or business trends or events, as
well as the other risks detailed from time to time in the Company's SEC filings,
including the quarterly report on Form 10-Q for the fiscal quarter ended July 1,
2000 and the Annual Report on Form 10-K for the fiscal year ended January 1,
2000. These risk factors may not be an all-inclusive enumeration of the business
risks faced by Wild Oats. Investors should recognize that the reliability of any
projected financial data diminishes the farther in the future the data is
projected.
<PAGE>
The statements made by management of the Company and summarized above represent
their views as of the date of this press release, and it should not be assumed
that the statements made herein remain accurate as of any future date. Wild Oats
does not presently intend to update these statements and undertakes no duty to
any person to effect any such update under any circumstances.
Information about Wild Oats
Wild Oats Markets, Inc. operates a nationwide chain of natural foods markets in
the U.S. and Canada, currently operating 111 stores in 22 states and British
Columbia. The Company's shares are traded on the Nasdaq National Market under
the symbol "OATS". For additional information, please contact Mary Beth Lewis,
Chief Financial Officer, at (303) 440-5220.
<PAGE>
<TABLE>
<CAPTION>
Wild Oats Markets, Inc.
Consolidated Statement of Operations
(In thousands, except per-share amounts)
(Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Thirteen Weeks Ended Thirty-Nine Weeks
----------------------------------------- -------------------------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
-------------------- ------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $207,201 100.0% $186,522 100.0% $631,214 100.0% $519,372 100.0%
Cost of goods sold and occupancy costs 144,947 70.0% 128,557 68.9% 436,098 69.1% 360,257 69.4%
---------- ---------- ---------- ----------
Gross profit 62,254 30.0% 57,965 31.1% 195,116 30.9% 159,115 30.6%
Direct store expenses 48,412 23.4% 40,076 21.5% 142,609 22.6% 111,045 21.4%
---------- ---------- ---------- ----------
Store contribution 13,842 6.7% 17,889 9.6% 52,507 8.3% 48,070 9.3%
Selling, general and administrative
expenses 7,548 3.6% 6,722 3.6% 22,226 3.5% 18,703 3.6%
Pre-opening expenses 1,018 0.5% 650 0.3% 2,916 0.5% 2,262 0.4%
Amortization of goodwill 800 0.4% 666 0.4% 2,320 0.4% 1,672 0.3%
Merger, restructuring and
other non-recurring expenses 645 0.3% 22,701 3.6% 11,538 2.2%
---------- ---------- ---------- ----------
Income from operations 4,476 2.2% 9,206 4.9% 2,344 0.4% 13,895 2.7%
Interest expense (income), net 2,315 1.1% 1,696 0.9% 6,071 1.0% 2,654 0.5%
---------- ---------- ---------- ----------
Income (loss) before
income taxes 2,161 1.0% 7,510 4.0% (3,727) -0.6% 11,241 2.2%
Income tax expense (benefit) 1,086 0.5% 2,628 1.4% (1,356) -0.2% 2,926 0.6%
---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
change in accounting principle 1,075 0.5% 4,882 2.6% (2,371) -0.4% 8,315 1.6%
Cumulative effect of change in
accounting principle, net of taxes 281 0.1%
---------- ---------- ---------- ----------
Net income (loss) $ 1,075 0.5% $ 4,882 2.6% $ (2,371) -0.4% $ 8,034 1.5%
========== ========== ========== ==========
Basic net income (loss) per
common share $ 0.05 $ 0.21 $ (0.10) $ 0.35
========== ========== ========== ==========
Weighted average number of
common shares outstanding 23,102 22,884 23,048 22,759
========== ========== ========== ==========
Diluted net income (loss) per
common share $ 0.05 $ 0.21 $ (0.10) $ 0.34
========== ========== ========== ==========
Weighted average number of
common shares outstanding 23,414 23,616 23,048 23,354
========== ========== ========== ==========
Pro forma net income (1) $ 4,457 $ 10,995 $ 12,859
========== ========== ==========
Pro forma diluted net income
per common share (1) $ 0.19 $ 0.47 $ 0.55
========== ========== ==========
Weighted average number of
common shares outstanding 23,616 23,527 23,354
========== ========== ==========
</TABLE>
(1) Pro forma net income and pro forma diluted net income per share reflect tax
adjustments for the fiscal 1999 mergers with Henry's Marketplace, Inc. and Sun
Harvest Farms, Inc. in separate pooling-of-interests transactions, which
included entities that were previously not taxable, as if Henry's and Sun
Harvest had filed C corporation tax returns for all periods presented. Pro forma
net income and pro forma diluted net income per share also exclude the merger,
restructuring and other non-recurring expenses in fiscal 2000 and fiscal 1999
and the cumulative effect of change in accounting principle in fiscal 1999.
