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 those listed in the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 2008. These risks and uncertainties 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, including fuel prices and housing market trends, the impact of competition, changes in the Company's access to available capital, 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 of supermarkets emphasizing natural and organic foods. Our Company mission is to promote the vitality and well-being of 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 April 12, 2009, we operated 280 stores: 269 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.

The Company reports its results of operations on a 52- or 53- week fiscal year ending on the last Sunday in September. The first fiscal quarter is sixteen weeks, the second and third quarters each are twelve weeks, and the fourth quarter is twelve or thirteen weeks. Fiscal years 2009 and 2008 are 52- week years.

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 from the comparable calculation 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.

Management Overview

During the second quarter of fiscal year 2009, we believe we struck the right balance between sales and gross margin while exhibiting strong cost controls, particularly in wages and general and administrative costs. We have been able to generate operating cash flows in excess of our capital expenditure requirements, and we are working to balance our long-term growth plans with our near-term focus on conserving capital and maintaining liquidity.

We believe consumers continue to be value driven in this economy and that our customers are taking increasing advantage of our value offerings. We started emphasizing our value programs last May, and we believe we are starting to change the dialogue about our prices and hopefully the perception as well. While these value programs may have a negative short-term impact on our comparable store sales, we believe we will be well-positioned to drive future comparable store sales increases through increased basket size and transaction count when the economy rebounds.

While increasing our value image is a key focus for us right now, we are also continuing to differentiate our product selection in ways that are important to our core customers and that reflect our authenticity and leadership role within natural and organic products. Our private label SKU count increased 5% year over year, accounting for 20% of our total retail grocery sales. Through joint efforts with our vendor partners, we now offer 300 exclusive branded products, with more in development.

We continue to re-evaluate our store development pipeline, with a focus on opening smaller stores with simpler décor designed with smaller, less-labor intensive perishable departments. During the second quarter of fiscal year 2009, the Company terminated two leases totaling approximately 100,000 square feet for stores previously scheduled to open in fiscal years 2011 and 2012. The Company also downsized one lease in development by approximately 8,500 square feet.

Although these are challenging times for retailers, we are pleased with our second quarter results. We believe we have made strategic decisions that have allowed us to maximize our short-term results in this period of slower sales growth, while remaining focused and staying true to our longer-term mission. We believe we will be well-positioned to take advantage of a rebound in the economy and look forward to getting past this recession and back on an upward growth trajectory.

Fiscal year 2009 second quarter

Sales were $1.9 billion, in line with the prior year. Comparable store sales decreased 4.8% compared to a 6.7% increase in the prior year. Identical store sales, excluding seven relocations and two major expansions, decreased 5.8% compared to a 5.1% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 4.1%, and identical store sales decreased 5.1%.

Income available to common shareholders was $27.3 million, and diluted earnings per share were $0.19. These results included approximately $2.8 million, of $0.01 per diluted share, of legal costs related to the FTC lawsuit and non-cash asset impairment charges of approximately $13.1 million, or $0.05 per diluted share.

Cash flows from operations were $173.0 million and capital expenditures were $74.9 million, of which $60.4 million related to new stores. In addition, the Company paid a cash dividend to preferred stockholders of $8.5 million.

Cash and cash equivalents, including restricted cash, increased to $362.8 million, and total debt was $743.5 million. Currently, the Company has approximately $260.9 million available on its credit line, net of $89.1 million in outstanding letters of credit. The Company continues to be in compliance with all applicable covenants in its credit agreements.

Fiscal year 2009 year-to-date

Sales were $4.3 billion, in line with the prior year. Comparable store sales decreased 4.4% compared to an 8.2% increase in the prior year, and identical store sales, excluding nine relocations and three major expansions, decreased 5.3% compared to a 6.2% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.6%, and identical store sales decreased 4.6%.

Income available to common shareholders was $55.1 million, and diluted earnings per share were $0.39. These results included approximately $13.9 million, or $0.06 per diluted share, of legal costs related to the FTC lawsuit and approximately $15.4 million, or $0.06 per diluted share, of non-cash asset impairment charges.

Cash flows from operations were $315.1 million and capital expenditures were $185.2 million, of which $142.5 million related to new stores. In addition, the Company paid cash dividends to preferred stockholders of approximately $11.3 million.

Fiscal year 2009 outlook

For the first four weeks of the third quarter, our comparable store sales declined 3.9%, including the negative impact of currency. If our comparable and identical store sales results in the second half of the year are in line with our first-half results of negative 4.4% and 5.3%, respectively, we estimate total sales in fiscal year 2009 of just under $8.0 billion, including the opening of seven new stores in the second half of the year, three of which are relocations.

Although there is an opportunity for our comparable store sales to improve in the second half of the year due to much easier year-over-year comparisons, continued improvement in the Wild Oats stores, and a lower number of cannibalized stores due to fewer new store openings, barring any significant economic changes, we believe a stabilization in comparable store sales driven by these factors, as opposed to further deceleration, is a more reasonable assumption at this time.

Year to date, our sales have averaged approximately $154.4 million per week, a level at which we have demonstrated strong discipline around gross margin, direct store expenses and general and administrative expenses, a discipline we hope to maintain for the remainder of the year. However, we expect new store sales to increase as a percentage of total sales, and we may choose to increase our value offerings to drive sales. In addition, we historically experience lower average weekly sales beginning in the summer months through September, and this typically results in lower gross margins and higher direct store expenses as a percentage of sales, particularly in the fourth quarter.

We are committed to producing operating cash flow in excess of the capital expenditures needed to open the 60 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.

As previously announced, the Company is awaiting final approval of the settlement agreement reached with the FTC resolving its antitrust challenge to the Company's acquisition of Wild Oats Markets, Inc. Under the terms of the agreement, a third-party divestiture trustee has been appointed to market for sale: leases and related assets for 19 non-operating former Wild Oats stores, 10 of which were closed by Wild Oats prior to the merger and nine of which were closed by Whole Foods Market; leases and related fixed assets for 12 operating acquired Wild Oats stores and one operating Whole Foods Market store; and Wild Oats trademarks and other intellectual property associated with the Wild Oats stores. The 13 operating stores had combined sales of approximately $24.6 million in the second quarter of fiscal year 2009, or approximately 1.3% of the Company's total sales of $1.9 billion.

Pursuant to the settlement agreement, the divestiture trustee has six months to market the assets to be divested. Any good faith offers that are not finalized by September 6, 2009, may result in an extension of up to six months. This twelve-month period may be extended further to allow the FTC to approve any purchase agreements submitted within that time period. All remaining obligations imposed on the Company by the settlement agreement are in support of the divestiture trustee process.

After receiving final approval by the FTC, the Company will record any required adjustments to measure long-lived assets related to certain of the 13 operating stores, for which sale and transfer of the assets is determined to be probable, at the lower of carrying amount or fair value less costs to sell. Any required adjustments to measure long-lived assets at the lower of carrying amount or fair value less costs to sell could result in a non-cash charge of up to approximately $5.5 million.

Results of Operations



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



                                            Twelve weeks ended       Twenty-eight weeks ended
                                           April 12,   April 13,    April 12,       April 13,
                                             2009        2008          2009            2008
Sales                                          100.0 %     100.0 %        100.0 %         100.0 %
Cost of goods sold and occupancy costs          65.3        65.1           66.0            65.8
Gross profit                                    34.7        34.9           34.0            34.2
Direct store expenses                           26.9        26.6           26.7            26.4
General and administrative expenses              3.1         3.6            3.2             3.6
Pre-opening expenses                             0.7         0.5            0.6             0.6
Relocation, store closure and lease
termination costs                                0.3         0.1            0.2             0.2
Operating income                                 3.7         4.0            3.2             3.5
Interest expense                                (0.4 )      (0.5 )         (0.5 )          (0.5 )
Investment and other income                        -         0.1              -             0.1
Income before income taxes                       3.3         3.6            2.7             3.1
Provision for income taxes                       1.4         1.5            1.1             1.3
Net income                                       1.9         2.1            1.6             1.8
Preferred stock dividends                        0.4           -            0.3               -
Income available to common shareholders          1.5 %       2.1 %          1.3 %           1.8 %

Figures may not sum due to rounding.

Sales for the twelve and twenty-eight weeks ended April 12, 2009 totaled approximately $1.9 billion and $4.3 billion, respectively, consistent with the same periods of the prior fiscal year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 4.1% and 3.6% for the twelve and twenty-eight weeks ended April 12, 2009, respectively, and identical store sales decreased 5.1% and 4.6%, respectively. As of April 12, 2009, there were 267 locations in the comparable store base. Identical store sales for the twelve weeks ended April 12, 2009 exclude seven relocated stores and two major expansions from the comparable calculation to reduce the impact of square footage growth on the comparison. Identical store sales for the twenty-eight weeks ended April 12, 2009 exclude nine relocated stores and three major expansions. The number of stores open 52-weeks or less equaled 20 at April 12, 2009. The sales increase contributed by stores open less than fifty-two weeks totaled approximately $115.7 million and $260.1 million for the twelve and twenty-eight weeks ended April 12, 2009, respectively. The Company believes that negative comparable and identical store sales reflect the results of the current uncertain economic environment and its effects on consumers' spending. Competition continues to be a factor as retailers fight over fewer food dollars being spent.

The Company's gross profit as a percentage of sales for the twelve and twenty-eight weeks ended April 12, 2009 was approximately 34.7% and 34.0%, respectively, compared to approximately 34.9% and 34.2%, respectively, for the same periods of the prior fiscal year. Factors contributing to the decrease in gross profit as a percentage of sales in second quarter of fiscal year 2009 compared to the same quarter of the prior fiscal year include an increase in occupancy costs of

approximately 48 basis points, which was partially offset by a 14 basis point decrease in our LIFO charge. To the extent changes in costs are not reflected in changes in retail prices or changes in retail prices are delayed, our gross profit will be affected. Our gross profit may vary throughout the year depending on seasonality, the level of price investments, the mix of sales from new stores, 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 due to the product mix of holiday sales and in the summer months through September, during which we have historically experienced lower average weekly sales. 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 for the twelve and twenty-eight weeks ended April 12, 2009 were approximately 26.9% and 26.7%, respectively, compared to approximately 26.6% and 26.4%, respectively, for the same periods of the prior fiscal year. During the second quarter of fiscal year 2009, the Company recorded impairment charges on long-lived assets related to operating locations totaling approximately $13.0 million. 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.

General and administrative expenses as a percentage of sales for the twelve and twenty-eight weeks ended April 12, 2009 were approximately 3.1% and 3.2%, respectively, compared to approximately 3.6% for each of the same periods of the prior fiscal year. These decreases were primarily due to the elimination of expenses associated with the Wild Oats home office in the prior year and cost-containment measures implemented at the Company's global and regional offices. FTC-related legal costs incurred during the twelve and twenty-eight weeks ended April 12, 2009 totaled approximately $2.8 million and $13.9 million, respectively.

Pre-opening expenses as a percentage of sales for the twelve and twenty-eight weeks ended April 12, 2009 were approximately 0.7% and 0.6%, respectively, compared to approximately 0.5% and 0.6%, respectively, for the same periods 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 for the twelve and twenty-eight weeks ended April 12, 2009 were approximately 0.3% and 0.2%, respectively, compared to approximately 0.1% and 0.2%, respectively, for the same periods of the prior fiscal year. 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. During the twelve and twenty-eight weeks ended April 12, 2009, the Company recorded reserves on new closures totaling $1.3 million and $2.4 million, respectively. The Company also recorded additional lease termination costs totaling approximately $1.9 million and $3.8 million during the same periods, respectively, to increase reserves for closed properties due to the downturn in the real estate market and actual exit costs.

The number of stores opened and relocated were as follows:

                    Twelve weeks ended       Twenty-eight weeks ended
                   April 12,   April 13,    April 12,       April 13,
                     2009        2008          2009            2008
New stores                 2           2              5               8
Relocated stores           1           -              3               -

Interest expense as a percentage of sales for the twelve and twenty-eight weeks ended April 12, 2009 was approximately 0.4% and 0.5%, respectively, consistent with the same periods of the prior fiscal year.

Income taxes for twelve and twenty-eight weeks ended April 12, 2009 resulted in an effective tax rate of approximately 42.5% and 42.0%, respectively, compared to approximately 41.0% and 40.8%, respectively, for the same periods 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):

                                               Twelve weeks ended           Twenty-eight weeks ended
                                            April 12,      April 13,       April 12,        April 13,
                                              2009            2008           2009             2008
Cost of goods sold and occupancy costs     $        49    $         35   $         172    $          99
Direct store expenses                            1,277           1,246           3,467            2,917
General and administrative expenses              1,027           1,041           2,503            2,336
Share-based payments expense before
income taxes                                     2,353           2,322           6,142            5,352
Income tax benefit                              (1,082 )          (975 )        (2,513 )         (2,136 )
Net share-based payments expense           $     1,271    $      1,347   $       3,629    $       3,216

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 $362.2 million and $30.5 million at April 12, 2009 and September 28, 2008, respectively.

We generated cash flows from operating activities totaling approximately $315.1 million during the twenty-eight weeks ended April 12, 2009 compared to approximately $161.3 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 twenty-eight weeks ended April 12, 2009, increased cash flows from operating activities principally were driven by increases in cash provided by changes in operating working capital.

Net cash used in investing activities totaled approximately $185.9 million for the twenty-eight weeks ended April 12, 2009 compared to approximately $111.7 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 twenty-eight weeks ended April 12, 2009 totaled approximately $185.2 million, of which approximately $142.5 million was for new store development and approximately $42.7 million was for remodels and other additions. Capital expenditures for the twenty-eight weeks ended April 13, 2008 totaled approximately $270.4 million, of which approximately $174.4 million was for new store development and approximately $96.0 million was for remodels and other additions. The Company currently expects to open an additional seven stores in fiscal year 2009. During the twenty-eight weeks ended April 13, 2008, the Company received net proceeds totaling approximately $163.9 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 May 13, 2009:

                                                                       Properties       Total
                                                                                       Leases
                                    Stores Opened    Stores Opened      Tendered       Signed
                                    During Fiscal    During Fiscal       as of          as of
                                                                                       May 13,
                                      Year 2008        Year 2009      May 13, 2009     2009(1)
Number of stores (including
relocations)                                   20               10              21           60
Number of relocations                           6                5               2            9
Number of lease acquisitions,
ground leases and owned
properties                                      4                3               6            7
New areas                                       3                1               4            8
Average store size (gross square
feet)                                      53,000           52,700          43,400       46,500
As a percentage of existing
store average size                            146 %            145 %           119 %        128 %
Total square footage                    1,060,700          527,100         911,200    2,826,200
As a percentage of existing
square footage                                 11 %              5 %             9 %         27 %
Average tender period in months               9.7             13.1
Average pre-opening expense per
store                                $2.5 million
Average pre-opening rent per
store                                $1.1 million
Average development cost            $15.8 million
Average development cost per
square foot                                  $297

(1)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. We believe we will produce operating cash flows in excess of the capital expenditures needed to open the 60 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:

. . .