Post on 18-Nov-2014
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2 0 04 A n n u a l Re p o r t
Our core values reflect the sense of collective fate among our stakeholders and are the soul of ourcompany. Our Team Members, customers, shareholders, vendors, community and environment mustflourish together through their affiliation with us or we are not succeeding as a business. It is leadership’srole to balance the needs and desires of all of our stakeholders and increase the productivity ofWhole Foods Market. By growing the collective pie, we create larger slices for all of our stakeholders.Our Core Values: � Selling the Highest Quality Natural and Organic Products Available � Satisfyingand Delighting Our Customers � Team Member Happiness and Excellence � Creating Wealth ThroughProfits and Growth � Caring About Our Communities and Our Environment
2004 was the best year in our 24-year history.
Financial Highlights 2004 2003 2002 2001 2000
sales (000s) $ 3,864,950 $ 3,148,593 $ 2,690,475 $ 2,272,231 $ 1,838,630operating income (000s) $ 216,646 $ 167,379 $ 140,985 $ 104,459 $ 94,643diluted eps from continuing operations $ 1.98 $ 1.58 $ 1.32 $ 0.84 $ 0.46number of stores at end of fiscal year 163 145 135 126 117average weekly sales per store $ 482,000 $ 424,000 $ 393,000 $ 353,000 $ 325,000comparable store sales increase 14.9% 8.6% 10.0% 9.2% 8.6%
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Dear Fellow Stakeholders:
I want to appreciate all of our Team Members for their
continued hard work and dedication and all of our customers
and shareholders for their continued support. In a year that
was challenging for most food retailers, we grew sales 23%
to just under $4 billion. Our 14.9% comparable store sales
increase set a new company record. We had strong sales
every quarter and across all regions, all departments, and
all age classes of stores. Even our stores over eight years of
age produced double-digit sales increases. Eighty-four percent
of all stores set weekly sales records and our sales per
gross square foot were $786, up from $716 last year.
Our net profit margin for the year improved 25 basis
points to 3.4% of sales, we produced a 21% increase in
diluted earnings per share to $1.98, well ahead of our initial
guidance of $1.87 to $1.95, and we reported four consec-
utive quarters of positive EVA resulting in record EVA improve-
ment of $12.6 million.
We earned $330 million in cash from operations which
allowed us to self fund our $265 million in capital expen-
ditures, of which $155 million was for new stores, as well
as $28 million paid to shareholders in quarterly cash div-
idends that we initiated at the beginning of the year. We
were very pleased to have the confidence in our financial
position to increase that quarterly dividend 27% to $0.19
per share at year end.
Our industry-leading performance and strong balance
sheet position led to our corporate credit rating being raised
to investment grade by both Moody’s Investors Service and
S&P Ratings Services and to a sharp 59% increase in our
stock price during the fiscal year.
Last year I spoke of three goals that were created during
our 2003 Future Search process which stood out for us as
major priorities in 2004. We made significant progress dur-
ing the year toward each of these goals.
G lo b a l E x pan s i o n
During the year, we opened our second store in Canada and
acquired six Fresh & Wild stores in the United Kingdom.
Growth Since IPO 9 /26 /04 9 /29 /91* cagr
number of stores 163 11 24%sales $3.9 b $92.5 m 33%earnings per share $1.98 $0.17 21%team members 32,100 1,100 30%stock price $84.73 $4.25 27%
*19 91 results do not include the impact of subsequent pooling transactions. Stock price is split-adjusted IPO price in Januar y 19 92.
2
Where Does the Money Go?
63.1%Cost of GoodsSold/Occupancy
24.2%Salaries/Benefits
9.2%Income Taxes/Other Expenses
3.4%Net Income
We are very excited about expanding our presence in
Canada and extending our company mission and the Whole
Foods Market brand beyond North America and into Europe.
The U.K. was an obvious choice due to the advanced
acceptance of organics and the lack of language barriers
there. We felt an acquisition was the right strategy for our
first overseas venture because, as with other successful
acquisitions we have made, the infrastructure and intel-
lectual capital we gained provided us with an immediate
platform for expansion. We are actively exploring real estate
opportunities in the London area with the goal of signing
a lease for a large format Whole Foods Market store in the
very near future.
A n i m a l C o m pas s i o n Stan da rd s
We decided the existing paradigm for animal production
should change and that we now have the scale and scope
to make a difference. Last year we began a rigorous process
of creating enhanced farm animal treatment standards
beyond the strict animal welfare we already required. These
enhanced standards are being developed jointly by Whole
Foods Market, animal welfare advocacy groups and various
farmers and ranchers that we do business with, and focus
on providing environments that best support the animals’
natural physical needs, behavior and well being. This year we
created standards for several species but hope to complete
standards for every species we sell over the next three years.
We also created an Animal Compassion Foundation which
will provide education and research services to assist and
inspire ranchers and meat producers around the world to
achieve a higher standard of animal welfare excellence while
still maintaining economic viability. Please check our web-
site for additional information about our welfare standards
and the Animal Compassion Foundation.
Wh o le Fo o d s M a r k et Un ive rs ity ( W F M - U )
As we continue to expand, maintaining our Team Members’
passion for our Mission and Core Values is an essential
ingredient in setting us apart from our competitors. Cindy
Bradley, formerly our VP of Team Member Services, was
selected as our new VP of Learning at WFM-U. The vision for
WFM-U is to create online, self-paced learning modules that
will engage our Team Members in active education and devel-
opment. The “U-Learn Network” was launched this year and
several modules, made up of learning vignettes, are already
accessible. In the future, we hope to create product-related
training materials that will be accessible to both Team
Members and customers, thereby creating an in-store learn-
ing environment that will become an important part of
the Whole Foods Market shopping and work experience.
“Building on the strength of 2004, I’m lookingforward to an even brighter 2005!”
The question I am asked most often is “how many Whole
Foods stores can there be?” I don’t answer that question
anymore because I have always been wrong in the past,
thankfully on the low side. We certainly are not limited by
opportunity as demographically the world continues to move
in our direction with an overall aging of the population and
a growing interest in health, well-being and longevity. Our
2004 class of new stores was our best yet, with the 12 new
stores (six of which were in new markets) averaging $575,000
in weekly sales for the year. We believe the fact that our new
stores are successful in markets as diverse as New York
City and Charleston, South Carolina, speaks to the broad
appeal of our stores and the growing awareness of our brand.
And, while I am not ready today to say our comparable store
sales have broken out of their historical 8% to 9% range,
we certainly have seen accelerating trends over the last ten
ence in Canada and extending our company mission and
the Whole Foods Market brand beyond North America and
into Europe. The U.K. was an obvious choice due to the
advanced acceptance of organics and the lack of language
barriers there, and we felt an acquisition was the right strat-
egy for our first overseas venture because, as with other
successful acquisitions we have made, the infrastructure
and intellectual capital we gained provided us with an imme-
diate platform for expansion. We are actively exploring real
estate opportunities in the London area with the goal of
signing a lease for a large format Whole Foods Market store
in the very near future.
A n i m a l C o m pas s i o n ate Stan da rd s
We decided the paradigm for animal production must
change and that we have the scale and scope to make a
difference so last year we began a rigorous process of creat-
ing enhanced farm animal treatment standards beyond the
strict animal welfare we already required. These enhanced
standards are being developed jointly by Whole Foods
Market and animal welfare advocacy groups and focus on
providing environments that best support the animals’
natural physical needs, behavior and well being. This year
we created standards for several species but hope to com-
plete standards for every species we sell over the next three
years. We also created an Animal Compassion Foundation
which will provide education and research services to assist
and inspire ranchers and meat producers around the world
to achieve a higher standard of animal welfare excellence
while still maintaining economic viability. Please check our
website for additional information about our animal wel-
fare standards and Animal Compassion Foundation.
Wh o le Fo o d s M a r k et Un ive rs ity ( W F M - U )
As we continue to expand, maintaining our Team Members’
passion for our Mission and Core Values is an essential
ingredient in setting us apart from our competitors. Cindy
Bradley, formerly our VP of Team Member Services, was
selected as our new VP of Learning at WFM-U. The vision for
WFM-U is to create online, self-paced learning modules that
will engage our Team Members in active education and devel-
opment. The “U-Learn Network” was launched this year
and several modules — made up of learning vignettes —
are already accessible. In the future, we hope to create
product-related training materials that will be accessible
to both Team Members and customers, thereby creating an
in-store learning environment that will become an impor-
tant part of the Whole Foods Market shopping and work
experience.
“Building on the strength of 2004, I’m looking for-ward to an even brighter 2005!”
The question I am asked most often is “how many Whole
Foods stores can there be?” I don’t answer that question
anymore because I have always been wrong in the past,
thankfully on the low side. We certainly are not limited by
opportunity as demographically the world continues to
move in our direction with an overall aging of the popu-
lation and a growing interest in health, well being and
longevity. Our 2004 class of new stores was our best yet,
with the 12 new stores (six of which were in new markets)
averaging $575,000 in weekly sales for the year. We believe
the fact that our new stores are successful in markets as
diverse as New York City and Charleston, South Carolina,
We are very pleased to announce that for the eighth year in a row our Team Members have rankedus as one of Fortune magazine’s “100 Best Companies to Work For.” In determining who makes thelist, Fortune evaluates company benefits and practices but places the greatest weight on responsesfrom a random survey of employees. With more than 32,000 Team Members, of which approximately84% are full-time, we are the only national food retailer to make the list. We moved up 17 places fromlast year to number 30 this year, our highest placement on the list so far, and of the 37 large companieslisted, we were ranked fifth. We were also recognized in the new Hall of Fame list of 22 companiesthat have appeared on the “100 Best” list since its inception in 1998.
E PA O C TO B E R 5, 2 0 04 – The Environmental Protection Agency (EPA) recognized us for our green power purchases with a 2004 Green Power Leadership Award. We currently purchase or generate more than 20% of our total national power from green power sources each year. 3
At 59,000 square feet, our Columbus Circle store in the Time Warner Center is the largest food storein Manhattan. It is a true foodie paradise offering culinary treasures from the finest authentic artisansand renowned purveyors of produce, meat, seafood, cheese, coffee, and baked goods that are free ofhydrogenated oils, artificial additives, preservatives, and sweeteners. Some of the store’s unique offer-ings include: a 248-seat café where shoppers can enjoy our restaurant-quality prepared foods; a fullservice Sushi Bar featuring fresh-cut sushi wrapped in organic seaweed; a walk-in Greenhouse show-casing fresh cut and exotic flowers; a Wine Shop serving more than 700 varieties of wine; and aChocolate Enrobing Station where customers can request just about anything to be covered in chocolate.
4
years, and most dramatically over the last year which
seems to indicate we are still significantly under-stored.
Our goal is to produce 15% weighted average square
footage growth in fiscal 2005 and beyond. We have suffi-
cient capital available to meet this goal, and over the last
five quarters, we have announced seven or more newly
signed leases creating a pipeline of 53 stores covering 21
states, Ontario, Canada, and the United Kingdom. These
stores average 49,000 gross square feet, a 53% increase
over our existing average store size of 32,000 gross square
feet. Our pipeline totals a record 2.6 million square feet,
a 63% increase in square footage under development over
last year, and represents 50% of our existing square footage.
Our biggest challenges in 2005 center around meet-
ing our higher square footage growth goals while delivering
strong results in light of the difficult comparisons we are
facing, particularly in the first half of the year. Despite 2004
being our best year ever, we still expect sales growth of 15%
to 20% and comparable store sales growth of 8% to 10%
in 2005. Due primarily to significantly higher pre-opening
expenses, it is likely our EPS growth will be lower than our
sales growth. In addition, new stores could have some
negative impact on store contribution, as new stores gen-
erally have lower gross margins and higher direct store
expenses than more mature stores.
The changes we made to our executive team and to
our operating structure will better position us for the
accelerated growth ahead. I transferred the title of Presi-
dent to Walter Robb and A.C. Gallo, and we promoted Lee
Valkenaar to the new position of Executive Vice President
of Global Support. We also expanded our number of oper-
ating regions from eight to ten for better regional support
of our existing store base as well as for our anticipated
future growth in those areas.
Even as we have grown at a rapid pace, hiring thou-
sands of new Team Members each year, we have managed
to spread and perpetuate our culture and this remains a
top priority for us. One of our secrets is what I refer to as
our “yogurt culture.” For example, in our Columbus Circle
store, about 25% of the Team Members transferred from
existing stores. They were the starting culture that launched
the fermentation that turned Columbus Circle into a true
Whole Foods store. I will always remember when we opened
our second store back in 1982, and Team Members told me
they feared we would get way too corporate and lose what
made us special. But we have proven that it doesn’t matter
how large we get as long we stay true to our core values
and continue to maintain and attract Team Members who
share our passion.
Our motto — Whole Foods, Whole People, Whole Planet™
— emphasizes that our vision reaches far beyond just food
retailing. We are focused on selling the highest quality
natural and organic foods in the world and helping evolve
a better person, company and world through our dedica-
tion to our core values, stringent quality standards and
principles of right livelihood, Team Member empowerment,
community service, conscientious retailing and sustain-
able agriculture.
We look forward to sharing and extending our vision
with the rest of the world as we open bigger and better
new stores at an accelerated rate in the years ahead, as
the brand awareness of Whole Foods Market continues to
increase, and as we progress toward our goal of $10 billion
in sales by the year 2010.
With warmest regards,
J o h n M ac k ey
C h a i r m an o f th e B oa rd
C h i e f E x e c utive O f f i c e r
5
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6
Rolando Alas
Produce Team Leader,Mill Valley
Tee Ayer
Store Team Leader,Galleria
Michael Besancon
President, SouthernPacific Region
Julie Birdsong
Project Leader, Central Support
Cindy Bradley
Vice President ofLearning/WFM-U
Patrick Bradley
President, MidwestRegion
Tana Bronk
Whole Body TeamMember, Madison
Sean Byrne
Meat Team Leader,Pasadena
Steve Campbell
Store Team Leader,Campbell
Janet Chaykin
Bakery Coordinator,Southwest Region
Barbara Coffman
Whole Body TeamLeader, Durham
Laura Derba
Store Team Leader,University Heights
Christopher Phillips-Frishman
Store Team Leader,West Bloomfield Hills
Omar Gaye
Store Team Leader,Alpharetta
Gary Giles
Seafood Team Leader,Pearl
Anthony Gilmore
President, NorthernCalifornia Region
Stephen Goldberg
Prepared FoodsDirector, NorthAtlantic Region
Robin Graf
Team Member Serv-ices Director, South-ern Pacific Region
Forrest Hoffmaster
Director ofOperational Finance,Mid-Atlantic Region
Don Hosfeld
Grocery Team Leader,Ft. Lauderdale
Bill Jordan
Vice President,Southern Pacific Region
George Khoury
Vice President,Southern Pacific Region
Paula Labian
Vice President of TeamMember Services
Roberta Lang
Vice President,General Counsel
Whole Foods Market recognizes excellence in leadership throughout the company with our GlobalAll*Star awards. With more than 32,000 Team Members in over 200 stores, facilities and officesacross the company, being recognized as a Global All*Star is a true achievement. We honor these48 individuals who have set incredibly high standards and have achieved truly outstanding resultsover the course of the past year.
2004 Global All*Stars
7
Terry Layton
Whole Body TeamLeader, WalnutCreek
Joel Leonard
Prepared Foods TeamLeader, Fresh Pond
Mike Litka
Store Team Leader,Marlton
Jennifer McFarlin
Payroll BenefitSpecialist, Madison
Adam Mitchel
Store Team Leader,Madison
Alanya Nelson
In Store Educator,Madison
Chris Pine
Vice President of Real Estate
John Robertson
Store Team Leader,Charlottesville
Joe Rogoff
Vice President,Northern CaliforniaRegion
Gerre Scherz
Store Team Leader,Wilcrest
David Schwartz
Vice President,Midwest Region
John Simrell
Director of Finance,South Region
Kel-e Sherman
Team MemberServices Director,Midwest Region
Dodi Steiniger
Director ofOperational Finance,Southern Pacific Region
Ron Stockman
Whole BodyCoordinator, FloridaRegion
Rocco Terrazano
Meat Team Leader,Yorkville
Jeff Teter
President & GeneralManager, AllegroCoffee Company
Michael Thompson
Store Receiver,Madison
Robert Thompson
Store Team Leader,Thousand Oaks
Julianne Ugo
Team Member ServicesCoordinator, NorthernPacific Region
Bobby Turner
Bakery Coordinator,Midwest Region
Theo Weening
Meat CategoryManager, Mid-AtlanticRegion
Felicia Williams
Customer Service TeamLeader, Rose City
Mark Wilson
Produce Coordinator,Southern PacificRegion
Our motto—Whole Foods, Whole People, Whole Planet™—emphasizes that our vision reaches farbeyond just food retailing. Through our new Animal Compassion Foundation, we will provide edu-cation and research services to assist and inspire ranchers and meat producers around the world to achieve a higher standard of animal welfare excellence while still maintaining economic viability.We believe the existing paradigm for animal production should change, and we now have the scaleand scope to make a difference. Just as we played an important role in the creation of organic standards,we will work to raise the bar in treating farm animals with more compassion, and we hope other retail-ers and animal producers will follow our lead.
8
Whole Foods MarketLeadership Team
Scott AllshousePresidentSouth Region
Michael BesanconPresidentSouthern Pacific Region
Cindy BradleyVice President of Learning
Patrick BradleyPresidentMidwest Region
Mike CliffordVice PresidentChief Information Officer
Mark DixonPresidentSouthwest Region
Glenda FlanaganExecutive Vice PresidentChief Financial Officer
Betsy FosterVice PresidentPurchasing and Distribution
A.C. GalloCo-PresidentChief Operating Officer
Anthony GilmorePresidentNorthern California Region
Marc JonnaNational Wine Buyer
Paula LabianVice PresidentTeam Member Services
Edmund LaMacchiaNational Produce Coordinator
Roberta LangVice PresidentGeneral Counsel
David LannonPresidentNorth Atlantic Region
Cindy McCannVice PresidentInvestor Relations
John MackeyChairman of the BoardChief Executive Officer
Lee MateckoVice PresidentOperational Finance
Ron MegahanPresidentPacific Northwest Region
Ken MeyerPresidentMid-Atlantic Region
Juan NunezPresidentFlorida Region
Will ParadisePresidentRocky Mountain Region
Walter RobbCo-PresidentChief Operating Officer
Jim SudExecutive Vice President Growth and BusinessDevelopment
Lee ValkenaarExecutive Vice PresidentGlobal Support
Margaret WittenbergVice PresidentMarketing and Public Affairs
Board of Directors
David W. DupreeManaging DirectorThe Halifax Group
Dr. John B. ElstrottDirectorLevy-Rosenblum Institute for Entrepreneurship, Tulane University’s FreemanSchool of Business
Avram J. GoldbergChairman of the BoardAVC AR Group, Ltd.
Gabrielle E. GreeneChief Financial Officer, Villanueva Companies
John MackeyChairman of the Board andChief Executive OfficerWhole Foods Market, Inc.
Linda A. MasonChairman of the Board,Bright Horizons Family Solutions
Morris J. SiegelFormer Vice Chairman of the Board, The Hain Celestial Group, Inc.
Dr. Ralph Z. SorensonManaging Partner,Sorenson Limited Partnership
Corporate and Shareholder Information
Trading Information
The common stock of WholeFoods Market is traded on theNasdaq Stock Market (symbol:WFMI). If you wish to become a shareholder, please contact astockbroker.
Dividend Policy
In November 2003, the Board of Directors declared a quarterlydividend of $0.15 per share, or$37 million, to shareholders infour quarterly dividends duringthe fiscal year. In November2004, the Board of Directorsapproved a 27% increase in thequarterly dividend to $0.19 pershare. The first $0.19 per sharequarterly dividend was payable inJanuary 2005, and the Companyexpects to pay approximately $48million in dividend payments toshareholders in fiscal year 2005.
Ordering Financial Statements
A copy of our Annual Report orForm 10-K may be obtained bywritten or phone request to:
Shareholder ServicesWhole Foods Market, Inc.550 Bowie StreetAustin, Texas 78703512.477.5566 ext. 20801
Annual Meeting
April 4, 20059:00 a.m. (EDT)New York Marriott East Side Hotel525 Lexington AvenueNew York, New York 10017
Transfer Agent & Registrar
Information about stock certifi-cates, change of address, owner-ship transfer or other stock matters can be obtained from:
Securities Transfer Corporation2591 Dallas Parkway, Suite 102Frisco, Texas 75034469.633.0101www.stctransfer.com
Independent AuditorsErnst & Young LLPAustin, Texas
Visit our web site www.wholefoodsmarket.com
Whole Foods Market, Inc.550 Bowie StreetAustin, Texas 78703www.wholefoodsmarket.com