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    Wild Oats Q3 Profit Up, but Chairman Mays Says 'We Can Do Better'

    BOULDER, Colo. -- Higher sales, improvements in gross margin, and a reduction of expenses drove Wild Oat's net income higher than expected by Wall Street, resulting in just over a half percent gain in share price at yesterday's closing.

    BOULDER, Colo. -- Higher sales, improvements in gross margin, and a reduction of expenses drove Wild Oat's net income higher than expected by Wall Street, resulting in just over a half percent gain in share price at yesterday's closing.

    Net sales for the natural and organic foods retailer's third quarter were $291.8 million, up 4.8 percent compared with $278.5 million for the same period last year. The sales gain was largely driven by new stores as the company grew its total square footage by 2.2 percent year-over-year to 2.61 million square feet at end of the quarter.
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    However, Wild Oats' Q3 comps were lower than its guidance of 3 percent to 4 percent, due to comparisons to a more challenging same-store sales growth of 6.1 percent last year, and the continued impact of new competition.

    Still, Wild Oats chairman and interim c.e.o. Gregory Mays maintained a positive outlook for Wild Oat's future same store growth. "Today our stores have excellent product quality, but we have a real opportunity to increase our product offerings, and then support those offerings with stronger marketing and merchandising initiatives, all with the purpose of driving comparable store sales growth," he said during yesterday's earnings conference call.

    "Simply put - our plan is to become more aggressive with our marketing and merchandising and with enhancing our customers' experience," he added. "Supported by our marquee name - a name that represents quality, integrity, and trust for organic and natural foods. By using these assets more aggressively, we believe we can improve the top line sales performance for fiscal 2007."

    Year-to-date 2006 net sales were $886.7 million, a 5.4 percent increase compared to last year's $841.2 million. Comparable store sales in the first nine months of 2006 increased 2.3 percent, compared to an increase of 3.7 in 2005. The company has revised its full-year 2006 comparable store sales guidance to a range of 2.0 percent to 2.5 percent.

    Net income for Q3 was $3.1 million, or 10 cents per diluted share, compared with just $82,000 for the same period last year. Year to date net income was $10.9 million, or 36 cents per share, compared to a net loss of $148,000, or 1 cent per diluted share last year.

    Wild Oats now expects full-year earnings per share to be in the range of 24 cents to 27 cents, which includes previously announced charges to be recorded in the fourth quarter, specifically, $3.7 million in severance charges relating to former c.e.o. Perry Odak's October 19 resignation, and $900,000 in charges relating to an agreement to terminate the lease of a store not yet opened in Chandler, Ariz. Excluding these charges, earnings per share for the full year 2006 would be in the range of 39 cents to 42 cents, compared to 11 cents for 2005.

    Mays noted that the organic category is seeing double-digit growth, and the company has potential to do better. "We continue to formalize the strategic operational and marketing initiatives to step up our product offerings, merchandising, and operational execution to maximize the sales growth being realized in this growing natural and organic space."

    Some of these initiatives will include a greater investment in store associates, a store re-merchandising rollout plan, and an expansion of Wild Oats branded products - a strategy it has implemented with Price Chopper Supermarkets last week, and with Pathmark yesterday.

    Pathmark will offer approximately 200 Wild Oats specialty branded products in 122 of its store locations, beginning in December. The selection will range from all-natural cookies and snacks, to organic pasta and imported Italian sodas, as well as everyday staples that provide natural and organic alternatives to mainstream brands.

    "This agreement enables Pathmark to differentiate itself from its competition as our customers will be able to purchase a full selection of quality natural and organic foods with a proven and trusted brand," said Ken Martindale, co-president and chief marketing and merchandising officer of Pathmark. "This is another important step in our overall repositioning of Pathmark.

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