We wish to caution you that there are risks and uncertainties that could cause our actual results to be materially different from those indicated by forward-looking statements that we make from time to time in filings with the Securities and Exchange Commission ("SEC"), news releases, reports, proxy statements, registration statements and other written communications, as well as oral forward-looking statements made from time to time by representatives of our Company. These risks and uncertainties include, but are not limited to, those listed in the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 2008. These risks and uncertainties and additional risks and uncertainties not presently known to us or that we currently deem immaterial may cause our business, financial condition, operating results and cash flows to be materially adversely affected. Except for the historical information contained herein, the matters discussed in this analysis are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the successful integration of acquired businesses into our operations, changes in overall economic conditions that impact consumer spending, the impact of competition, the ability to access additional capital as needed, the successful resolution of ongoing Federal Trade Commission ("FTC") matters, and other factors which are often beyond the control of the Company. The Company does not undertake any obligation to update forward-looking statements except as required by law.

General

Whole Foods Market, Inc. and its consolidated subsidiaries own and operate the largest chain supermarkets emphasizing natural and organic foods. Our Company mission is to promote vitality and well-being for all individuals by supplying the highest quality, most wholesome foods available. Through our growth, we have had a significant and positive impact on the natural and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance. We opened our first store in Texas in 1980 and, as of January 18, 2009, we operated 279 stores: 268 stores in 38 U.S. states and the District of Columbia; six stores in Canada; and five stores in the United Kingdom. We have one operating segment, supermarkets emphasizing natural and organic foods.

Our results of operations have been and may continue to be materially affected by the timing and number of new store openings. Stores typically open within 24 months after entering the store development pipeline. New stores generally become profitable during their first year of operation; although some new stores may incur operating losses for the first several years of operation.

Sales of a store are deemed to be comparable commencing in the fifty-third full week after the store was opened or acquired. Identical store sales exclude sales from relocated stores and remodeled stores with expansions of square footage greater than 20% until the fifty-third full week after the store is relocated or remodeled to reduce the impact of square footage growth on the comparison. Stores closed for eight or more days are excluded from the comparable and identical store base from the first fiscal week of closure until re-opened for a full fiscal week.

The Company reports its results of operations on a 52- or 53-week fiscal year ending on the last Sunday in September. Fiscal years 2009 and 2008 are 52-week years.

Overview

Whole Foods Market continues to experience a challenging retail environment caused by a number of ongoing factors including the general economic environment in the United States, United Kingdom, and Canada. Sales for the sixteen weeks ended January 18, 2009 compared to the prior year were flat at $2.5 billion. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.4 percent during the sixteen weeks ended January 18, 2009, and identical store sales decreased 4.2 percent. Reduced transaction count drove the year-over-year decline, but average basket size was down slightly as well, with a decrease in the number of items per transaction more than offsetting a small increase in average price per item. Identical store sales decelerated from the fourth quarter of fiscal year 2008, with markets having higher foreclosure and jobless rates experiencing a greater negative impact. Competition continues to be a factor as retailers fight over fewer food dollars being spent. For the quarter, income available to common shareholders was approximately $27.8 million and diluted earnings per share was $0.20. These results included approximately $11.0 million, or $0.05 per diluted share, in legal costs related to the FTC lawsuit.

We have worked hard to increase the value choices throughout our stores, particularly in our perishable areas, while still maintaining our quality standards, and, over the past year, we have done a much better job of highlighting our commitment to value with signage, placement, and price. In this environment, all retailers prefer customers trade down within their store rather than trade out of their store, and we are proactively and creatively communicating to our team members and customers how well we compare to other retailers. At the same time, we are making positive strides in differentiating our product selection in ways that are important to our core customers and to our authenticity and leadership role within natural and

organic products. Our private label SKU count increased 11 percent year over year. In addition, through joint efforts with our vendor partners, we now offer 300 exclusive branded products, with more in development.

While we are disappointed to report the first negative comparable store sales figure in our Company's 29-year history, the difficult strategic decisions we made during the fourth quarter of fiscal year 2008 to contain costs and cut capital spending are helping us successfully manage through this period of slower sales growth, including the following:

† We implemented certain cost-containment measures at the global, regional and store levels, including the elimination of 306 positions;

† We reduced our planned new store openings by approximately 50% for fiscal year 2009 to 15;

† We terminated 11 leases in development totaling approximately 570,000 square feet and downsized nine leases by an average of 11,000 square feet each;

† We cut all discretionary capital expenditure budgets not related to new stores by 50%; and,

† We suspended our cash dividend to common shareholders.

Additionally, on December 2, 2008, the Company issued 425,000 shares of Series A 8.00% Redeemable Convertible Exchangeable Participating Preferred Stock to affiliates of Leonard Green & Partners, L.P., for net proceeds totaling approximately $413.1 million. We repaid all amounts outstanding on our revolving line of credit, during the sixteen weeks ended January 18, 2009 with net proceeds from the investment and ended the quarter with cash and cash equivalents totaling approximately $272.6 million. We believe our results demonstrate we can operationally adjust to lower sales volumes and believe that this flexibility, combined with our improved balance sheet, will allow us to successfully manage through these difficult economic times and emerge a stronger company over the long run.

Subsequent to the end of the first quarter, the FTC agreed to suspend its antitrust review regarding the Wild Oats merger through March 6, 2009. We are currently engaged in constructive dialogue with the FTC to find a mutually agreeable resolution, which we are hopeful of reaching.

Executive Summary

Sales for the sixteen weeks ended January 18, 2009 compared to the prior year were flat at $2.5 billion. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.4 percent during the sixteen weeks ended January 18, 2009, and identical store sales decreased 4.2 percent.

General and administrative expenses as a percentage of sales decreased to 3.3% for the sixteen week period ended January 18, 2009 from 3.6% for the same period of the prior fiscal year primarily due to the elimination of expenses associated with the Wild Oats home office and cost-containment measures implemented at the Company's global and regional offices. FTC-related legal costs incurred during the sixteen week period ended January 18, 2009 totaled approximately $11.0 million.

Net income available to common shareholders for the first quarter totaled approximately $27.8 million and diluted earnings per share was $0.20.

Our capital expenditures for the sixteen weeks ended January 18, 2009 totaled approximately $110.3 million, of which approximately $82.1 million was for new store development and approximately $28.2 million was for remodels and other additions. During the sixteen weeks ended January 18, 2009, we opened five stores, including two relocations. We ended the quarter with 279 stores totaling approximately 10.2 million square feet.

At January 18, 2009, cash and cash equivalents totaled approximately $272.6 million. During the sixteen week period ended January 18, 2009, the Company received proceeds totaling approximately $413.1 million, net of closing and issuance costs, from the Series A Preferred Stock investment and paid down $195 million on our credit line, net of borrowings. At the end of the first quarter, the Company has approximately $260.6 million available on its credit line, net of $89.4 million in outstanding letters of credit, and total debt outstanding of approximately $748.4 million. The Company continues to be in compliance with all applicable covenants in its credit agreements.

Results of Operations



The following table sets forth the Company's statements of operations data
expressed as a percentage of sales:



                                                           Sixteen weeks ended
                                                        January 18,   January 20,
                                                           2009          2008
Sales                                                         100.0 %       100.0 %
Cost of goods sold and occupancy costs                         66.6          66.4
Gross profit                                                   33.4          33.6
Direct store expenses                                          26.5          26.2
General and administrative expenses                             3.3           3.6
Pre-opening expenses                                            0.6           0.6
Relocation, store closure and lease termination costs           0.2           0.2
Operating income                                                2.7           3.0
Interest expense                                               (0.6 )        (0.5 )
Investment and other income                                     0.1           0.1
Income before income taxes                                      2.2           2.7
Provision for income taxes                                      0.9           1.1
Net income                                                      1.3           1.6
Preferred stock dividends                                       0.2             -
Income available to common shareholders                         1.1 %         1.6 %

Figures may not sum due to rounding.

Sales for the sixteen weeks ended January 18, 2009 were flat at $2.5 billion compared to the same period of the prior fiscal year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.4 percent during the sixteen weeks ended January 18, 2009, and identical store sales decreased 4.2 percent. Identical store sales exclude eight relocated stores and three major store expansions from the comparable calculation to reduce the impact of square footage growth on the comparison. As of January 18, 2009, there were 265 locations in the comparable store base. The sales increase contributed by stores open less than fifty-two weeks totaled approximately $144.4 million for the sixteen weeks ended January 18, 2009.

Gross profit consists of sales less cost of goods sold and occupancy costs plus contribution from non-retail distribution and food preparation operations. The Company's gross profit as a percentage of sales for the sixteen weeks ended January 18, 2009 was approximately 33.4% compared to approximately 33.6% for the same period of the prior fiscal year. Our gross profit may increase or decrease slightly depending on the mix of sales from new stores, seasonality, the impact of weather or a host of other factors, including inflation. Due to seasonality, the Company's gross profit margin is typically lower in the first quarter than the remaining three quarters of the fiscal year. Gross profit margins tend to be lower for new stores and increase as stores mature, reflecting lower shrink as volumes increase, as well as increasing experience levels and operational efficiencies of the store teams.

Direct store expenses as a percentage of sales were approximately 26.5% for the sixteen weeks ended January 18, 2009 compared to approximately 26.2% for the same period of the prior fiscal year. Direct store expenses as a percentage of sales tend to be higher for new and acquired stores and decrease as stores mature, reflecting increasing operational productivity of the store teams. For stores in the identical store base, direct store expenses improved 13 basis points from the prior year to 26.0% of sales due primarily to leverage in wages and certain other direct store expenses that more than offset increases in workers' compensation, healthcare and depreciation as a percentage of sales.

General and administrative expenses as a percentage of sales decreased to approximately 3.3% for the sixteen weeks ended January 18, 2009 compared to approximately 3.6% for the same period of the prior fiscal year, primarily due to the elimination of expenses associated with the Wild Oats home office and cost-containment measures implemented at the Company's global and regional offices. Excluding approximately $11.0 million in FTC-related legal costs incurred during the sixteen week period ended January 18, 2009, general and administrative expenses decreased to approximately 2.9% of sales.

Pre-opening expenses as a percentage of sales were approximately 0.6% for both the sixteen weeks ended January 18, 2009 and the same period of the prior fiscal year. Pre-opening expenses include rent expense incurred during construction of new stores and other costs related to new store openings, including costs associated with hiring and training personnel, supplies and other miscellaneous costs. Rent expense is generally incurred beginning approximately 10 months prior to a store's opening date. Other pre-opening expenses are incurred primarily in the 30 days prior to a new store opening.

Relocation, store closure and lease termination costs as a percentage of sales were approximately 0.2% for both the sixteen weeks ended January 18, 2009 and the same period of the prior fiscal year. Relocation, store closure and lease termination costs for the sixteen weeks ended January 18, 2009 include charges totaling approximately $1.9 million for increases in reserves for closed properties due to the downturn in the real estate market and the economy in general. Relocation costs consist of moving costs, estimated remaining lease payments, accelerated depreciation costs, related asset impairment, and other costs associated with replaced facilities. Store closure costs consist of estimated remaining net lease payments, accelerated depreciation costs, related asset impairment, and other costs associated with closed facilities. Lease termination costs consist of estimated remaining net lease payments for terminated leases and idle properties and associated asset impairments.

The number of stores opened and relocated during the sixteen week periods ended January 18, 2009 and January 20, 2008 were as follows:

                   January 18,   January 20,
                      2009          2008
New stores                   5             6
Relocated stores             2             -

Interest expense for the sixteen weeks ended January 18, 2009 increased to approximately $13.6 million compared to approximately $11.6 million for the same period of the prior fiscal year due primarily to interest expense related to amounts outstanding on the Company's revolving line of credit during the sixteen weeks ended January 18, 2009.

Investment and other income for the sixteen weeks ended January 18, 2009 totaled approximately $1.8 million compared to approximately $2.8 million for the same period of the prior fiscal year due primarily to lower interest income earned based on lower average interest rates.

Income taxes for the sixteen weeks ended January 18, 2009 resulted in an effective tax rate of approximately 41.5% compared to approximately 40.5% for the same period of the prior fiscal year.

Share-based payments expense recognized during the sixteen weeks ended January 18, 2009 totaled approximately $2.4 million compared to approximately $1.9 million for the same period of the prior fiscal year. Share-based payments expense was included in the following line items on the Consolidated Statements of Operations for the periods indicated (in thousands):

                                                        Sixteen weeks ended
                                                   January 18,      January 20,
                                                       2009            2008
Cost of goods sold and occupancy costs             $        123    $          64
Direct store expenses                                     2,190            1,671
General and administrative expenses                       1,476            1,295
Share-based payments expense before income taxes          3,789            3,030
Income tax benefit                                        1,431            1,161
Net share-based payments expense                   $      2,358    $       1,869

The Company intends to keep its broad-based stock option program in place, but also intends to limit the number of shares granted in any one year so that annual earnings per share dilution from share-based payments expense will not exceed 10%. The Company believes this strategy is best aligned with its stakeholder philosophy because it limits future earnings per share dilution from options and at the same time retains the broad-based stock option plan, which the Company believes is important to team member morale, its unique corporate culture and its success.

Liquidity and Capital Resources and Changes in Financial Condition

The Company had cash and cash equivalents totaling approximately $272.6 million and $30.5 million at January 18, 2009 and September 28, 2008, respectively.

We generated cash flows from operating activities totaling approximately $142.1 million during the sixteen weeks ended January 18, 2009 compared to approximately $76.1 million during the same period of the prior fiscal year. Cash flows from operating activities resulted primarily from our net income plus non-cash expenses and changes in operating working capital.

During the sixteen weeks ended January 18, 2009, increased cash flows from operating activities were driven by an increase in cash provided by changes in operating working capital, offset by a decline in net income.

Net cash used in investing activities totaled approximately $110.4 million for the sixteen weeks ended January 18, 2009 compared to approximately $4.9 million for the same period of the prior fiscal year. Our principal historical capital requirements have been the funding of the development or acquisition of new stores and acquisition of property and equipment for existing stores. The required cash investment for new stores varies depending on the size of the new store, geographic location, degree of work performed by the landlord and complexity of site development issues. Capital expenditures for the sixteen weeks ended January 18, 2009 totaled approximately $110.3 million, of which approximately $82.1 million was for new store development and approximately $28.2 million was for remodels and other additions. Capital expenditures for the sixteen weeks ended January 20, 2008 totaled approximately $165.5 million, of which approximately $106.5 million was for new store development and approximately $59.1 million was for remodels and other additions. The Company currently expects to open an additional 10 stores in fiscal year 2009. The Company expects total capital expenditures to be in the range of $350 million to $400 million for fiscal year 2009. During the sixteen weeks ended January 20, 2008, the Company received net proceeds totaling approximately $165.1 million from the sale of certain assets and liabilities of the 35 Henry's and Sun Harvest stores and a related distribution center acquired in the purchase of Wild Oats.

The following table provides information about the Company's store development activities during fiscal year 2008 and fiscal year-to-date through February 18, 2009:

                                                                      Properties               Total
                                 Stores Opened    Stores Opened        Tendered            Leases Signed
                                 During Fiscal    During Fiscal          as of                 as of
                                   Year 2008        Year 2009      February 18, 2009    February 18, 2009(2)
Number of stores (including
relocations)                                20                5                   17                      68
Number of relocations                        6                2                    6                      13
Number of lease acquisitions,
ground leases and owned
properties                                   4                1                    7                       9
New areas                                    3                1                    2                       8
Average store size (gross
square feet)                            53,000           53,600               50,000                  47,900
As a percentage of existing
store average size                         146 %            147 %                137 %                   131 %
Total square footage                 1,060,700          268,000              849,600               3,291,000
As a percentage of existing
square footage                              11 %              3 %                  8 %                    32 %
Average tender period in
months                                     9.7             11.9
Average pre-opening expense
per store                         $2.5 million
Average pre-opening rent per
store                             $1.1 million
Average development cost(1)      $15.9 million
Average development cost per
square foot(1)                            $300

(1)Average development cost includes estimated costs for three stores.

(2)Includes leases for properties tendered.

The following table provides additional information about the Company's estimated store openings for the remainder of fiscal year 2009 through 2013 based on the Company's current development pipeline. The Company has reduced all discretionary capital expenditures not related to new stores by 50%. We believe we will produce operating cash flows in excess of the capital expenditures needed to open the 68 stores in our store development pipeline over the next five years. We believe the investments we are making in our new, acquired and existing stores will result in substantial earnings growth in the near future. These openings reflect estimated tender dates which are subject to change and do not incorporate any potential new leases, terminations or square footage reductions:

                                                                          Total       Average
                                                                        New Store    New Store
                                  Total                       New        Square       Square
                                 Openings    Relocations     Areas       Footage      Footage
Fiscal year 2009 remaining
stores in development                  10              5           -      526,800       52,700
Fiscal year 2010 stores in
development                            15              -           4      616,300       41,100
Fiscal year 2011 stores in
development                            17              2           -      780,000       45,900
Fiscal year 2012 stores in
development                            16              4           1      835,600       52,200
Fiscal year 2013 stores in
development                            10              2           3      498,000       49,800
Total(1)                               68             13           8    3,256,700       47,900

(1)Total square footage excludes one major expansion in development.

The Company expects total pre-opening and relocation costs for fiscal year to be in the range of $55 million to $60 million, of which approximately half relates to pre-opening rent.

Net cash provided by financing activities was approximately $213.9 million for the sixteen weeks ended January 18, 2009 compared to net cash used in financing activities totaling approximately $25.5 million for the same period of the prior fiscal year. Proceeds from long-term borrowings totaled $123.0 million for the sixteen weeks ended January 18, 2009 compared to $30.0 million for the same period of the prior fiscal year. Payments on long-term debt and capital lease obligations totaled approximately $320.7 million for the sixteen weeks ended January 18, 2009 compared to approximately $39.0 million for the same period of the prior fiscal year. Net proceeds to the Company from team members' stock plans for the sixteen weeks ended January 18, 2009 totaled approximately $1.4 million compared to approximately $7.0 million for the same period of the prior fiscal year.

The Company has outstanding a $700 million, five-year term loan agreement due in August 2012 that was executed to finance the acquisition of Wild Oats Markets, Inc. The loan bears interest at our option of the alternative base rate ("ABR") plus an applicable margin, currently 0.75%, or LIBOR plus an applicable margin, currently 1.75%, based on the Company's Moody's and S&P rating. These applicable margins are currently the maximum allowed under these agreements. The interest period on LIBOR borrowings may range from one to six months at our option. During the sixteen week period ended January 18, 2009, as a result of downgrades to our corporate credit rating and as called for in the loan agreement, the participating banks obtained security interests in certain of the Company's assets to collateralize amounts outstanding under the term loan. The term loan agreement contains certain affirmative covenants including maintenance of certain financial ratios and certain negative covenants including limitations on additional indebtedness and payments as defined in the agreement. At January 18, 2009, we were in compliance with all applicable debt covenants. During the sixteen week period ended January 20, 2008, the Company entered into . . .