Shares of Whole Foods Market, Inc. (WFM - Analyst Report) rose 8% during after-market trading hours yesterday, following a better-than-expected fourth-quarter fiscal 2014 bottom line and an encouraging guidance. The company posted earnings of 35 cents a share that surpassed the Zacks Consensus Estimate of 32 cents, and rose 9.4% from the year-ago quarter benefiting from market share gain on account of national marketing and branding campaign, home delivery services and product launches.

Whole Foods Market, Inc. - Earnings Surprise | FindTheBest

This natural and organic foods supermarket chain operator delivered sales of $3,256 million which increased 9.4% year over year. We believe that effective inventory management and improved store-level performance helped the company to generate improved sales. However, sales were below of the Zacks expectation of $3,268 million.

Whole Foods has been revamping its pricing strategy and concentrating on value offerings in view of heightened competition as an increasing number of companies are entering plus expanding their presence in the Organic & Natural food business. These companies include The Kroger Co. (KR - Analyst Report),Sprouts Farmers Market, Inc. (SFM - Snapshot Report) and Wal-Mart Stores Inc.(WMT - Analyst Report).

Whole Foods stated that comparable-store sales rose 3.1% in the quarter. For the first five weeks of the first quarter of fiscal 2015, comparable-store sales jumped 4.6%. Identical store sales grew 3% during the quarter under review, and were up 4.5% in the first five weeks of the quarter.

The company indicated that EBITDA rose 8% to $296 million, while EBITDA margin decreased 10 basis points to 9.1%. Operating income grew 6.8% to $205 million, whereas operating margin contracted 20 basis points to 6.3%.

Stores Update

Whole Foods currently operates 401 stores. The company opened 13 new outlets during the quarter under review. So far in the first quarter of fiscal 2015, the company has opened 3 new outlets, including one relocation and plans to open 6 more stores. The company plans to open 38 to 42 outlets in fiscal 2015, including 5 to 6 relocations. Moreover, it believes that there exists room for 1,200 stores in the long run, and expects to surpass the count of 500 in fiscal 2017.

Other Financial Details

Whole Foods ended the quarter with cash and cash equivalents of $190 million, long-term capital lease obligations of $60 million, and shareholders’ equity of $3,813 million.

During the quarter, Whole Foods generated cash flow from operations of $229 million and incurred capital expenditures of $185 million, resulting in free cash flow of $44 million. The company paid $44 million in quarterly dividends and bought back $100 million worth of shares. The company also hiked its quarterly dividend by a penny to 13 cents a share. The next dividend will be paid on Jan 27, 2015 to stakeholders of record as of Jan 16.

The company has been utilizing its cash flow for opening new stores, paying down debt and returning cash to shareholders through dividends and share repurchases.

Guidance at a Glance

Whole Foods now projects an escalation of over 9% in sales for fiscal 2015 on the back of low-to-mid single-digit growth in comparable-store sales. Management forecast EBITDA margin of about 9% and ROIC of over 14%. Moreover, management expects earnings per share growth to remain level with or be marginally higher than the rate of increase in sales.

Zacks Rank for Whole Foods

Currently, Whole Foods carries a Zacks Rank #4 (Sell), which could witness an improvement in the coming days.

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