Organic food retailer Wild Oats Markets announced a return to profit this week, thanks to a reduction in stores and tighter control on expenses. Eight consecutive quarters of same-store sales increases contributed to the significant improvement in net income for the year.
Sales of the year ended December 27, 2002 rose 2.9 per cent above last year's figure, up to $919.1 million, with net income of $6.9 million comparing favourably to last year's loss of $43.9 million.
After closing nine stores in 2002, as part of a rationalization program, same-store sales were up by 5.2 per cent in 2002, compared with 4 per cent in 2001.
However in the fourth quarter, net sales were down slightly aswell as comparable store sales which dropped to 2.9 per cent, compared with 5.7 per cent in the 2001 fourth quarter. The company attributed lower traffic at its stores to the stock keeping unit (SKU) rationalization and transition to a new primary distributor - both of which led to product discontinuances and higher than anticipated out-of-stock conditions, it said.
"The major initiatives we successfully completed in 2002 helped us to return to profitability earlier than expected and to develop an infrastructure for sustainable, long-term growth. However, we realize that we are experiencing some short-term operational disruptions related to the aggressive strategies implemented in 2002 to turn this company around," said Perry D. Odak, president and chief executive officer.
Future plans will include "an aggressive remodel, re-set and new store growth plan, and enhanced marketing and merchandising programs to increase customer awareness, traffic and sales," he added.
Wild Oats reported gross profit of $274.3 million in 2002, a 6.1 per cent increase compared with $258.5 million in 2001. A better profit margin was achieved through more disciplined pricing strategies, a new category management structure, the consolidation of vendors and rationalization of SKUs. Gross profit margins improved throughout the year, with the strongest levels being achieved in the fourth quarter of 2002, a 9.5 per cent increase on the same period last year.
Direct store expenses in 2002 were down 4.8 per cent primarily due to better expense management at store-level, as well as the centralization of several non-retail contracts, said the company. Selling, general and administrative (SG&A) expenses were up due to investments in marketing, information systems, and personnel.
The company added that it is still on track to open up to 10 stores this year and 15 to 20 in 2004.
"We have developed a new prototype for our Wild Oats stores that has proven to be successful, and we will open our new Henry's Marketplace prototype at the end of February 2003. We have developed greater financial and cost management discipline throughout our organization, which has driven our return to profitability in 2002. Finally, we have raised more than $50 million in equity to fund an aggressive store remodel and new store development program, and, in conjunction with this, have signed four new leases and numerous letters of intent to fill our real estate pipeline," said Odak.
Wild Oats Markets currently operates 101 natural food stores in 25 US states and British Columbia, Canada, including Wild Oats Natural Marketplace, Henry's Marketplace, Nature's, Sun Harvest and Capers Community Market.