Wild Oats on Thursday said second-quarter net income fell 97 percent, in part because of legal fees spent fighting federal regulators over Whole Foods' planned $671 million takeover.

Boulder-based Wild Oats reported net income fell to $127,000, or less than 1 cent a share, compared with $4.9 million, or 16 cents, in the year-earlier period. Sales increased 5 percent to $311.8 million.

Wild Oats is waiting to find out from a judge whether larger rival Whole Foods can proceed with its takeover. The Federal Trade Commission wants to block the sale, saying it would lead to less competition and higher prices for premium natural and organic foods.

Sales at Wild Oats stores open at least a year increased 3.1 percent from the year-earlier period, the company's best showing in more than a year. Wild Oats, which operates 109 stores in 23 states, is in the process of remodeling its stores and exiting lagging locations.

"It appears that Oats management is doing a good job holding the business together while running it more profitably," Goldman Sachs analyst Simeon Gutman said in a note to clients. "This bodes well for (Whole Foods) if the deal goes through."

Wild Oats also disclosed that it laid off 68 employees this year at its Boulder headquarters and at a New Jersey store whose lease expired. The cuts took place before Whole Foods announced its $18.50-a-share- plus-debt buyout in late February, spokeswoman Sonja -Tuitele said.

The FTC in June announced it had filed suit to block the merger, and Wild Oats said it spent $6.5 million in expenses related to the merger during the quarter. Overall, selling, general and administrative expenses increased 44 percent to $16.4 million in the quarter.

Wild Oats executives didn't hold a conference call to discuss the results because the judge's decision in the case is expected soon, Tuitele said.

Wild Oats

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