Whole Foods Announces $1 Bln Buyback; Intends To Take On Incremental Debt

(RTTNews) - Whole Foods Market (WFM) annouced that its Board has authorized a new $1 billion share repurchase program, as part of a new capital allocation strategy, bringing the company's total share repurchase authorization to $1.3 billion. The Board declared a 4% increase in the quarterly dividend to $0.135 per share from $0.13 per share.

As part of its capital structure strategy, the company recently entered into a $500 million five-year revolving credit facility. In addition, prior to the end of the first quarter, the company intends to incur additional long-term debt of up to $1 billion. The company may also incur additional short-term debt of up to $350 million. The company noted that the proceeds from any debt incurred would be used for general corporate purposes, including the repurchase of stock.

The company's intent is to spend the majority of the $1 billion buyback authorization in the first half of the fiscal year and expects the combined effects of the additional indebtedness and future share repurchases to be accretive to earnings per share in fiscal 2016. Excluding an estimated $0.05 to $0.07 per share in net accretion related to these debt-financed buybacks, the company expects earnings per share for the fiscal year of $1.50 or greater. For fiscal 2016, the company expects: sales growth of 3% to 5%, and EBITDA margin of approximately 8.5%.

The company noted that it will be facing the toughest comp and earnings comparisons in the first quarter, which will also include approximately $0.01 per share in costs associated with the recent restructuring.

For the fourth-quarter, ended September 27, 2015, the company reported that its total sales increased 6% to $3.4 billion. Comparable store sales on a constant currency basis decreased 0.2%. EBITDA were $196 million, compared to $296 million, prior year. Excluding charges, EBITDA margin was 8.0%.