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UPDATE 3-Whole Foods' profit, forecast beats Street

* Q1 EPS 20 cents vs average forecast 14 cents

* Q1 same-store sales down 4 pct - first in co’s history

* 2009 EPS 71 cents-76 cents vs Wall St view 62 cents

* Shares rise 6 pct after-hours (Adds CEO quotes, legal costs, capex detail; updates shares)

By Alexandria Sage

SAN FRANCISCO, Feb 18 (Reuters) - Whole Foods Market IncWFMI.O posted a quarterly profit that beat Wall Street estimates and forecast 2009 earnings ahead of analyst expectations, sending its shares up nearly 6 percent.

Despite the company’s first-ever decline in same-store sales, investors cheered evidence that the high-end grocery chain was finding ways to reduce costs as customers cut back on shopping trips and pare more expensive items from their lists.

“We are demonstrating we can operationally adjust to lower sales volumes,” Chief Executive John Mackey said.

In the midst of a recession, Whole Foods -- which specializes in organic, natural and gourmet products -- has cut jobs, reduced its store opening plans, pared back its capital expenditure budget and suspended its cash dividend.

The company, nicknamed by some as “whole paycheck”, also said it was working to provide more value to its customers, particular in its perishable food departments.

Mackey noted that the sale price of organic apples was about half the price of a year ago.

Stores now have displays comparing prices versus competitors and run contests where customers can win a basket full of merchandise if they correctly guess its price.

“We believe we are starting to change the dialogue about our prices, and hopefully the perception as well,” Mackey said during a call with analysts.

Still, executives acknowledged the difficult economic times, which were sending consumers to lower-priced grocers.

“Competition continues to be a factor as retailers fight over fewer food dollars being spent,” Mackey said.

SAME-STORE SALES DROP

Whole Foods said its fiscal first-quarter net income fell to $32.3 million, or 20 cents per diluted share, from $39.1 million, or 28 cents per share, a year earlier, hurt by legal costs and a drop in same-store sales.

Analysts, on average, had expected earnings of 14 cents per share, according to Reuters Estimates.

Sales of $2.5 billion were essentially flat compared with with the prior year. But same-store sales, a key gauge of financial performance that measures sales at stores open at least a year, fell 4 percent.

The company said the decline in same-store sales was the first in its 29-year history.

Sales trends improved in January, it said.

“While it is obviously still too early to say our sales are stabilizing, we are encouraged by these trends,” Mackey said.

Gross profit as a percentage of sales was also nearly flat at 33.4 percent, compared with 33.6 percent a year earlier.

Whole Foods is currently in settlement talks with the U.S. Federal Trade Commission over the company’s merger with Wild Oats. In July, a U.S. appeals court overturned a lower court decision allowing the Wild Oats buyout to proceed.

During the first quarter, the company incurred $11 million in legal costs related to the FTC and said it expected additional costs in the second quarter.

Whole Foods previously estimated that fiscal 2009 FTC-related legal costs would be $15 million to $20 million.

Whole Foods said total sales for 2009 would be about $8.3 billion based on flat same-store sales, the same outlook the company provided in November.

It again declined to give an outlook for same-store sales.

The company said it now expected full-year earnings to range between 71 cents and 76 cents per share. That compares to the 62 cents expected, on average, by Wall Street analysts.

Whole Foods said it would reduce capital spending during fiscal 2009 to a range of $350 million to $400 million from its earlier estimate of $400 million to $450 million.

The company’s shares rose 5.8 percent to $9.83 in extended trade after closing at $9.29 on the Nasdaq. (Reporting by Alexandria Sage; Editing by Toni Reinhold and Ted Kerr)

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