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| Source: | LOHAS Weekly Newsletter |
| Published: | Wednesday, December 01, 1999 |
The deal gives OATS a total of 105 stores, with 23 stores in development, six of which are relocations of existing markets. WFMI has 100 stores, with 29 in development, says Kathryn Knowles in WFMI’s shareholder services.
OATS says it will pay $21.5 million in a stock-for-stock exchange for the nine-store independent Sun Harvest Farms chain and $12.5 million cash for the four-store Wild Harvest chain, operated by East Bridgewater, MA-based Shaw’s Supermarkets, a unit of the U.K.’s J. Sainsbury.
OATS CFO Mary Beth Lewis says the deal is being financed through a $120 million revolving credit facility OATS has with four different banks.
Sun Harvest’s name and management will remain with the company, but the Wild Harvest stores will operate under the Wild Oats banner. Sun Harvest stores average 18,000 to 20,000 sq. ft., and Wild Harvest stores average about 25,000 sq. ft.
So which chain really is No. 1?
In truth, statistically OATS can claim No. 1 status in only two categories: total number of stores and stock performance since March.
While OATS’ recent acquisitions give it the edge in total number of natural foods supermarkets, the chain still ranks second to WFMI in total square footage and annual revenue.
According to Lewis, OATS now has almost 2 million total retail sq. ft. But as of Sept. 26, the end of WFMI’s fiscal year, Whole Foods reported 2.6 million in retail square feet.
Lewis says less than half—45—of OATS’ stores are 20,000 sq. ft. or larger.
WFMI posted revenues of $1.56 billion for FY99, up 13% from FY98 revenues of $1.4 billion. For OATS’ most recent four quarters, sales were $542 million. FY98 revenues were $399 million. OATS expects volume from the new acquisitions will be about $100 million, and other acquisitions in 1999 are predicted to add another $200 million.
WFMI, then, is still arguably the largest supernatural retailer in the U.S. It is not, however, the natural foods retailer that, at least since March, has captured Wall Street’s fickle heart.
Even though WFMI’s stock quote average for the year is slightly higher than OATS’, charts show that while WFMI’s quotes have been on a slide since late July, albeit with a recent strong surge after 4Q99 results, OATS’ have been on the rise since March.
The divergence has been particularly pronounced since July, when OATS’ stock prices began a steady increase and WFMI’s started a steady decrease. During that time, OATS went on an acquisitions binge and WFMI introduced its WholePeople.com website—to guarded reviews.
Analysts cite several reasons for OATS’ stock growth and WFMI’s decline.
First, says Tucker Cleary Senior VP Carole Buyers, WFMI’s earnings have been revised downward through the year, while OATS consistently “meets and beats their numbers.”
Steve Taracevicz, a research analyst with Wedbush Morgan Securities, says OATS’ recent acquisitions are key. “Wild Oats is executing a much stronger growth strategy. They’re expanding square feet faster than WFMI.”
And although OATS has acquired 37 stores this year, analysts like how the new purchases are being handled.
“When you look out into 2000, their cash from operations equals the cash flow we expect them to spend on opening new stores,” Buyers says. Taracevicz cites strong revenues for OATS’ new acquisitions—$.40 per sales dollar for Sun Harvest, and $.25 per sales dollar for Wild Harvest.
OATS’ acquisition of the four Wild Harvest stores brings the company to the competitive Boston market for the first time. OATS also will strengthen its presence in WFMI’s base of operations, Texas, through the acquisition of the Sun Harvest Farms stores.
But, though the new acquisitions will bring OATS head-to-head with WFMI in more markets, Lewis says reports of competition between the two are exaggerated.