Boulder-based Wild Oats Markets Inc. reported Thursday a dramatic 97 percent drop in second-quarter net income compared with last year.
In a filing with the Securities and Exchange Commission, the natural- and organic-food grocery chain attributed the fall to expenses related to a proposed merger with rival Whole Foods Market Inc.
There was $6.5 million in transaction costs for the merger – which is pending – that masked a 5 percent boost in second-quarter revenue over the prior year, said Sonja Tuitele, spokeswoman for Wild Oats.
The filing showed a drop to $127,000 in earnings for the three-month period ending June 30, compared with earnings of $4.87 million in the second quarter of 2006.
Net income fell to less than 1 cent per share, compared with 16 cents per share in the prior period.
“The numbers, at face value, look a lot more dramatic than they are,” Tuitele said Thursday. Costs related to the proposed merger with Whole Foods, which has been challenged as anti-competitive by the Federal Trade Commission in a case that is expected to be decided this month, resulted in the income drop, she said.
“If you actually take that ($6.5 million) out,” she said, “net income would have been 23 cents per share, as opposed to less than 1 cent.”
“If you take out expenses related to the merger, it was probably one of the strongest quarters we’ve had,” she said.
Reports showed revenue rose 5 percent to $311.8 million from $296.6 million in the second quarter of 2006.
Same-store sales, revenue from stores open at least a year, grew 3.1 percent in the quarter. Same-store sales measure growth at existing stores rather than at newly opened ones.
Michael Krestell, an analyst with M Partners in Toronto, said he thought Wild Oats’ results “were quite good … especially given all of their situation with the pending merger.”
To show 3.1 percent improvement on same-store sales “despite everything that’s happening” shows that management and staff were able to focus, Krestell said.
Such a large business transaction “creates a distraction for the organization,” he said. “When you’re uncertain of what the outcome is going to be … it can be difficult to focus on the times ahead.
“We’ve seen other companies almost paralyzed,” Krestell said.
Whole Foods is planning to buy Wild Oats for $760 million. The Federal Trade Commission has sought a preliminary injunction to stop the deal on antitrust grounds.
Whole Foods has 191 stores, including seven in Colorado. Wild Oats has 110 locations, including 13 in Colorado.
Wild Oats shares fell 49 cents Thursday to close at $15.03.
Staff writer Karen Rouse can be reached at 303-954-1684 or krouse@denverpost.com.
