Wild Oats loses out to new stores and rewards program
than expected take up of its holiday rewards program and ongoing
expenses related to the opening of new stores for a
wider-than-predicted quarterly loss.
The food retailer based in Boulder, Colorado reported on Wednesday a net loss of $3.8 million or $0.13 per share for the fourth quarter of 2004, bringing the year's balance to a net loss of $7.1 million or $0.25 per share.
According to Reuters Estimates, analysts, on average, had expected the company to post a loss of 6 cents a share.
Perry Odak, the firm's CEO, tried not to sound too despondent, saying: "The best way to characterize 2004 is we overcame several challenges and instituted a significant anount of change, which put pressure on our business and reduced our short-term potential for profitability".
The company explained its fourth quarter losses more specifically as the result of an extrememly favorable customer response to its holiday rewards program, "which generated a greater level of coupon redemptions than anticipated".
Wild Oats said its profitability suffered throughout fiscal 2004 because the opening of 12 new stores caused "lower gross margins and higher direct store expenses".
"New stores initially have higher direct store expenses and shrink associated with their start up," said the company.
On the other hand, though, the increase in stores caused sales to multiply - net sales increasing 11 percent in the fourth quarter to reach $281.9 million.
The company said its strategy for 2005 is to produce "profitable growth" through new marketing initiatives designed to broaden its appeal to more customers and the continued roll-out of higher-margin private label products.
Morever, the firm seems to be in the right business for growth; the organic food market in the US is estimated to be worth $10.4 billion and it shows no signs of tiring - it grew by 20.4 percent in 2003 - and sales are expected to reach $16.1 million in 2008, according to a recent report published by Eurominitor.
"Sales of organic food have outpaced those of traditional grocery products due to consumer perceptions that organic food is better for them," said the report.
According to a 2002 study by the Food Marketing Institute (FMI), 61 percent of consumers felt that organic foods were more beneficial for their health, 57 percent of them said that they had purchased organic foods in the past six months or had used them to help maintain their health. This figure was up from 50 percent in 2001.
The survey also found that fans of organic food believe it offers a "richer, deeper taste" than conventionally grown produce. Among Americans, the most frequently purchased organic food types are vegetables, fruit, cereals/grains, closely followed by yoghurt, UHT milk and dried pasta products.
National standards for certifying organic foods became effective in the US on 21 October 2002, establishing a national definition for the term "organic". Items that meet the new requirements are able to bear a green and brown "USDA organic" seal that certifies that the food was organically grown.
