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Whole Foods, Under Pressure from Organic Consumers, Says it Will Expand Organic Offerings in 2010

Whole Foods Market Inc. will put a renewed focus on its core customers, with expanded offerings of organic food and a campaign next year focused on healthy eating.

"We believe continuing to raise the bar in areas that matter to our customers will reinforce our leadership position in natural and organic foods, resulting in greater customer loyalty for many years to come," CEO John Mackey said Tuesday.

Mackey disclosed the plans as Whole Foods reported a 2 percent increase in sales in its fiscal third quarter compared with a year earlier and per-share profit that was higher than analysts had expected.

The company had net income of $42.8 million on revenue of $1.88 billion. In the same quarter of 2008, net income was $33.9 million, on revenue of $1.84 billion.

Deducting dividends paid to preferred shareholders, the profit available to common shareholders was $35 million, compared with $33.9 million a year earlier.

On a per-share basis, the company made 25 cents in the quarter, compared with analyst expectations of 20 cents.

"We are hopeful that sales are starting to move in the right direction," Mackey told analysts.

Hurt by the recession and a drop-off in consumer spending, Whole Foods had been in a slump for several quarters. That remained evident during the third quarter, as sales at stores open at least a year slipped by 2.5 percent. But that was an improvement from the 4.8 percent drop in the previous quarter.

And Mackey said Whole Foods is now seeing lower costs "driven by better purchasing disciplines as well as improved store-level execution."

The company's shares rose almost 14 percent in extended trading, to $28.26. They closed at $24.82, up less than 1 percent, in regular trading.

Canaccord Adams analyst Simeon Gutman said he thinks the move to expand organic offerings will be the right strategy to differentiate Whole Foods from its competitors.
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