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WFMI $72~$63~64 reported EPS for its fiscal 1Q06 of $0.40, matching their estimate, but falling $0.01 short of consensus. Firm says that while sales growth was as strong as ever, margins declined in the quarter. They also say WFMI's one-time dividend of $4.00 per share distorted the co's income statement and balance sheet in the quarter. While they believe the law of large numbers will eventually slow WFMI's superlative growth, the FY06 outlook remains robust.
They say its new store development schedule will likely strengthen as they expect it to purchase several attractive sites dribbling out of conventional chains undergoing rationalization, especially Albertsons. Banc of America says WFMI's qtr EPS was in line with their expectation for stronger sales (13% comp vs their model 10.7%) yet higher new store costs (as they noted was a ‘wild card') causing a 7bp drag. Importantly, they say comparable stores were 31bps above their gross margin estimate, and new store opening costs drag will diminish. Firm raises their comps estimates to 10.9% from 9.4%. Reits Buy.
They say its new store development schedule will likely strengthen as they expect it to purchase several attractive sites dribbling out of conventional chains undergoing rationalization, especially Albertsons. Banc of America says WFMI's qtr EPS was in line with their expectation for stronger sales (13% comp vs their model 10.7%) yet higher new store costs (as they noted was a ‘wild card') causing a 7bp drag. Importantly, they say comparable stores were 31bps above their gross margin estimate, and new store opening costs drag will diminish. Firm raises their comps estimates to 10.9% from 9.4%. Reits Buy.
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