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Whole Foods' Whole Nine Yards

Whole Foods Market (Nasdaq: WFMI  ) offered investors a mixed bag (biodegradable, of course) in its fourth-quarter results. As far as I can tell, the numbers show that integrating Wild Oats won't be a magic bullet for the retailer, though I did spot several heartening signs of strength.

Fourth-quarter net income decreased 15% to $33.9 million, or $0.24 per share, as the company dealt with expenses, particularly from opening and relocating stores. On the other hand, sales increased by an impressive 25%, to $1.74 billion. Comps increased 8.2%, compared with an 8.6% increase this time last year.

Whole Foods now looks a little different than it used to. It's piled on a sizeable helping of long-term debt and capital lease obligations, at $736.1 million. That, in turn, brings along a $4.2 million chunk of quarterly interest expense. Economic Value Added, or EVA, dropped 45% for the year. Maybe that's why the company increased its dividend by 11%.

Still, although Whole Foods missed analysts' earnings expectations for the quarter, it did beat with its revenue. The company has a rosy sales outlook, expecting 7.5% to 9.5% comps growth in fiscal 2008, as well as 25% to 30% sales growth. It's hard to imagine rivals like Safeway (NYSE: SWY  ) , Wal-Mart (NYSE: WMT  ) , and Kroger (NYSE: KR  ) readily or consistently matching such figures.

In a timely announcement during the earnings conference call, CEO John Mackey sought to correct what he considers a common misconception: that recessionary times spell trouble for Whole Foods. Mackey said that in past recessions, the company has done just fine. As it stands now, the company's stores are doing well in high-profile California, even though the housing bust hit that region especially hard. In addition, as Whole Foods improves Wild Oats stores, the company suspects that it may end up generating higher gross margins and lower prices at the former Wild Oats. That'd be a win for shareholders and customers alike.

It will take time for the company to integrate Wild Oats, although executives on the conference call said that so far, the process seems to be moving rather quickly. (Shareholders can certainly appreciate that.) Whole Foods still has plenty of work to do, but it offers heartening signs for long-term investors.

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