BOULDER, CO-Wild Oats Markets Inc., the specialty grocery chain that emphasizes natural and organic foods, explained its third-quarter loss and offered hope for better future financials in a conference call Thursday regarding its latest quarterly earnings. The company, which lost $6.1 million in the third quarter, blamed a number of unusual conditions, including the lingering effects of last year’s Southern California supermarket strike, price wars in Texas, disappointing results from some of its new stores, and the vagaries and vicissitudes of the retail business. Wild Oats expects to open 15 new stores in 2005, but on Thursday it withdrew its estimate of up to 40 new stores in 2006, saying it will update that number in February.

The Southern California supermarket strike was a double-edged sword for Wild Oats, according to Perry Odak, president and CEO of the company, who said year-to-date net sales were bolstered by the positive benefit of the California United Food and Commercial Workers strike against conventional grocery retailers in Southern California, which ended in February.

But the strike also produced a negative impact in that Wild Oats’ sales in the first three quarters of this year have been “adversely affected by conventional grocers’ overly aggressive promotional activity in Southern California.” Odak suggested that Wild Oats would have been hard pressed to compete against conventional grocers, who spent at least $100 million in the third quarter alone, after taxes, to rebuild their businesses.

“We chose not to go head-to-head in July and August because those are usually the slowest months in food retailing, but we knew there would be a point when we had to protect our customer base in advance of the big fourth-quarter food holidays,” Odak said in Thursday’s conference call. “We chose early September to invest in pricing and promotions that we continued through October and November.” The promotional spending “had an adverse impact on our third quarter margins,” Odak said, but Wild Oats believes the promotional spending was “the right thing to do to protect and maintain our customer base.”

The Wild Oats CEO said the company faced “an unusual combination of circumstances” in the third quarter, but the quarterly results “are not a reflection of the underlying strength of this company or of our industry,” he said. The company plans to open 15 new stores in 2005 and previously said it would open up to 40 new locations in 2006, but it now says the 2006 number will probably change. “We are withdrawing our guidance of up to 40 new stores for 2006. We will update this number in February when we report our results for the full year,” Odak said.

The company’s $6.1 million loss in the third quarter amounted to 21 cents per share, compared with a net loss of $861,000, or 3 cents per share, in the same period last year. Sales totaled $250.7 million in the third quarter, compared with $237 million in the third quarter of 2003.

Odak said the investments in pricing and promotions have begun to drive sales in the fourth quarter and that measures the company has implemented will “ultimately drive profitable growth for Wild Oats.” Wild Oats Markets Inc. operates a nationwide chain of natural and organic foods markets in the US and Canada, with nearly $970 million in annual sales from 108 natural foods stores in 24 states and British Columbia. Its markets do business under the names Wild Oats Natural Marketplace, Henry’s Farmers Market, Sun Harvest and Capers Community.

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