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, 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 natural and organic food supermarkets. 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 July 5, 2009, we operated 281 stores: 270 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, natural and organic food supermarkets.

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

We believe we are continuing to strike the right balance between sales and gross margin while exhibiting strong cost control, producing a 23% increase in income from operations. During the third quarter of fiscal year 2009, 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.

While some competitors appear to be pulling back on organic as they emphasize value more, we are refocusing on our core customers and expanding our organic offerings. Our sales growth in organic products is outpacing growth in natural products, driven in part by organic private label products. We recently announced that each of our stores in the United States has been individually certified as compliant with the new stricter federal organic retailer certification requirements. While some certified organic retailers may have certified just a few departments and focus on shrink-wrapped organic produce, every department in our stores that handles organic food is certified. We believe continuing to raise the bar in areas that matter to our customers will reinforce our leadership position in natural and organic foods, resulting in greater customer loyalty for many years to come.

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 third quarter of fiscal year 2009, the Company terminated two leases totaling approximately 121,000 square feet for stores previously scheduled to open in fiscal years 2012 and 2013.

Although these are challenging times for retailers, we are very pleased with our third quarter and year-to-date results. We believe we have made strategic decisions that have allowed us to maximize our short-term results in this period of slower sales, while renewing our focus on our core customers and staying true to our longer-term mission. We are hopeful that sales

are starting to move in the right direction. We are 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.

As previously announced on June 1, 2009, the Federal Trade Commission ("FTC") approved a final consent order of the settlement agreement 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.

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.

During the twelve weeks ended July 5, 2009, the Company recorded adjustments totaling approximately $4.8 million to measure long-lived assets and certain lease liabilities related to certain of the operating stores for which sale and transfer of the assets was determined to be probable or more likely than not at the lower of carrying amount or fair value less costs to sell. The total fair value associated with these locations at July 5, 2009 was approximately $0.2 million. The Company has determined that these locations do not meet the conditions for reporting their results in discontinued operations.

Fiscal year 2009 third quarter

Sales totaled approximately $1.9 billion for the twelve weeks ended July 5, 2009, increasing 2.0% over the prior year. Comparable store sales decreased 2.5% compared to a 2.6% increase in the prior year. Identical store sales, excluding nine relocations and two major expansions, decreased 3.8% compared to a 1.9% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 2.0% and identical store sales decreased 3.3%.

Income available to common shareholders was approximately $35.0 million, and diluted earnings per share was $0.25. These results included a LIFO credit of $5.8 million, or $0.02 per diluted share, versus a $2.7 million charge last year and approximately $6.8 million, or $0.03 per diluted share, in non-cash asset impairment charges primarily related to the FTC settlement agreement.

Cash flows from operations were $159.6 million and capital expenditures were $66.9 million, of which $54.5 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 $448.0 million, and total debt was $742.2 million. At July 5, 2009, the Company had approximately $334.8 million available on its credit line, net of $15.2 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

For the forty weeks ended July 5, 2009, sales increased 0.6% to approximately $6.2 billion. Comparable store sales decreased 3.8% versus a 6.4% increase in the prior year, and identical store sales, excluding twelve relocations and three major expansions, decreased 4.9% versus a 4.9% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.1% and identical store sales decreased 4.2%.

Income available to common shareholders was approximately $90.1 million, and diluted earnings per share was $0.64. These results included approximately $14.2 million, or $0.06 per diluted share, of legal costs related to the FTC lawsuit and approximately $22.2 million, or $0.09 per diluted share, of non-cash asset impairment charges.

Cash flows from operations were $474.7 million and capital expenditures were $252.1 million, of which $196.9 million related to new stores. In addition, the Company paid cash dividends to preferred stockholders of approximately $19.8 million.

Fiscal year 2009 outlook

For the first four weeks of the fourth fiscal quarter ended August 2, 2009, comparable store sales decreased 1.1%, and identical store sales decreased 2.7%. Excluding the impact of foreign currency, comparable stores decreased 0.7%, and identical store sales decreased 2.4%. We are pleased with the trends we are seeing but want to emphasize that we will have eight new stores enter the identical store base in the fourth quarter, cycling over their strong opening sales last year. In addition, further deflation as well as increased price investments could negatively impact our sales. If our comparable and identical store sales in the fourth quarter remain in line with our first four week results, our total sales growth would be approximately 2.9% for the quarter and approximately 1.1% for the year.

Year to date, sales have averaged approximately $154 million per week, a level at which the Company has demonstrated strong disciplines around gross margin, direct store expenses and general and administrative expenses, disciplines the Company hopes to maintain. However, the Company historically has experienced lower average weekly sales in the fourth quarter, which typically results in lower gross profit and higher direct store expenses as a percentage of sales. In addition, the Company has implemented further price investments and is starting to compare against many of the cost disciplines put into effect last year.

We are committed to producing operating cash flow in excess of the capital expenditures needed to open the 55 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.

Results of Operations



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



                                          Twelve weeks ended      Forty weeks ended
                                          July 5,     July 6,    July 5,     July 6,
                                           2009         2008       2009        2008
Sales                                        100.0 %     100.0 %    100.0 %     100.0 %
Cost of goods sold and occupancy costs        64.8        65.6       65.7        65.8
Gross profit                                  35.2        34.4       34.3        34.2
Direct store expenses                         26.6        26.6       26.7        26.5
General and administrative expenses            2.8         3.3        3.1         3.5
Pre-opening expenses                           0.6         0.8        0.6         0.7
Relocation, store closure and lease
termination costs                              1.0         0.1        0.5         0.2
Operating income                               4.2         3.5        3.5         3.5
Interest expense                              (0.4 )      (0.4 )     (0.5 )      (0.5 )
Investment and other income                    0.1         0.1          -         0.1
Income before income taxes                     3.9         3.1        3.0         3.1
Provision for income taxes                     1.6         1.3        1.3         1.3
Net income                                     2.3         1.8        1.8         1.8
Preferred stock dividends                      0.4           -        0.3           -
Income available to common
shareholders                                   1.9 %       1.8 %      1.5 %       1.8 %

Figures may not sum due to rounding.

Sales for the twelve and forty weeks ended July 5, 2009 totaled approximately $1.9 billion and $6.2 billion, respectively, increasing approximately 2.0% and 0.6%, respectively, over the same periods of the prior fiscal year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 2.0% and 3.1% for the twelve and forty weeks ended July 5, 2009, respectively, and identical store sales decreased 3.3% and 4.2%, respectively. As of July 5, 2009, there were 269 locations in the comparable store base. Identical store sales for the twelve weeks ended July 5, 2009 exclude nine relocated stores and two major expansions from the comparable calculation. Identical store sales for the forty weeks ended July 5, 2009 exclude twelve relocated stores and three major expansions from the comparable calculation. The number of stores open fifty-two weeks or less equaled 20 at July 5, 2009. The sales increase contributed by stores open less than fifty-two weeks totaled approximately $130.4 million and $331.2 million for the twelve and forty weeks ended July 5, 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 forty weeks ended July 5, 2009 was approximately 35.2% and 34.3%, respectively, compared to approximately 34.4% and 34.2%, respectively, for the same periods of the prior fiscal year. For the third quarter of fiscal year 2009, the LIFO adjustment was a $5.8 million credit versus a $2.7 million charge last year, a positive impact of 45 basis points as a percentage of sales. Excluding LIFO, gross profit increased 33 basis points, with an improvement in cost of goods sold more than offsetting higher occupancy costs as a percentage of sales. We are seeing lower cost of goods sold as a result of better purchasing disciplines as well as improved store-level execution, particularly in terms of shrink control and inventory management. 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 forty weeks ended July 5, 2009 were approximately 26.6% and 26.7%, respectively, compared to approximately 26.6% and 26.5%, respectively, for the same periods of the prior fiscal year. During the twelve and forty weeks ended July 5, 2009, the Company recorded fixed asset impairment charges included in direct store expenses related to operating locations totaling approximately $0.1 million and $14.5 million, respectively. These charges were primarily offset by an improvement in labor costs as a percentage of sales of the forty weeks ended July 5, 2009. 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 forty weeks ended July 5, 2009 were approximately 2.8% and 3.1%, respectively, compared to approximately 3.3% and 3.5%, respectively, for the same periods of the prior fiscal year. These decreases were primarily due to cost-containment measures implemented at the Company's global and regional offices in the fourth quarter of the prior fiscal year. FTC-related legal costs incurred during the twelve and forty weeks ended July 5, 2009 totaled approximately $0.4 million and $14.2 million, respectively.

Pre-opening expenses as a percentage of sales for each of the twelve and forty weeks ended July 5, 2009 were approximately 0.6% compared to approximately 0.8% and 0.7%, 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 13 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 forty weeks ended July 5, 2009 were approximately 1.0% and 0.5%, 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 net 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 forty weeks ended July 5, 2009, the Company recorded non-cash asset impairment charges included in store closure costs totaling approximately $6.7 million and $7.4 million, including approximately $5.2 million during the third quarter related to the potential sale of certain operating store assets under the FTC settlement agreement. The Company also recorded additional lease termination costs totaling approximately $9.7 million and $13.5 million during the same twelve and forty weeks ended July 5, 2009, 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     Forty weeks ended
                    July 5,     July 6,   July 5,     July 6,
                     2009        2008       2009       2008
New stores                 1          4          6         12
Relocated stores           3          -          6          -

Income taxes for twelve and forty weeks ended July 5, 2009 resulted in an effective tax rate of approximately 41.0% and 41.6%, 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         Forty weeks ended
                                         July 5,       July 6,      July 5,       July 6,
                                           2009          2008         2009          2008
Cost of goods sold and occupancy
costs                                   $      102    $       49   $      274    $      148
Direct store expenses                        1,416           982        4,883         3,899
General and administrative expenses          1,169         1,216        3,672         3,552
Share-based payments expense before
income taxes                                 2,687         2,247        8,829         7,599
Income tax benefit                          (1,121 )        (735 )     (3,612 )      (2,871 )
Net share-based payments expense        $    1,566    $    1,512   $    5,217    $    4,728

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 $377.0 million and $30.5 million and restricted cash totaling approximately $71.0 million and $0.6 million at July 5, 2009 and September 28, 2008, respectively. The increase in restricted cash at July 5, 2009 primarily relates to cash deposited as collateral to support a portion of our projected workers' compensation obligations that were previously collateralized by an outstanding letter of credit.

We generated cash flows from operating activities totaling approximately $474.7 million during the forty weeks ended July 5, 2009 compared to approximately $271.4 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 forty weeks ended July 5, 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 $323.4 million for the forty weeks ended July 5, 2009 compared to approximately $254.4 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 forty weeks ended July 5, 2009 totaled approximately $252.1 million, of which approximately $196.9 million was for new store development and approximately $55.2 million was for remodels and other additions. Capital expenditures for the forty weeks ended July 6, 2008 totaled approximately $394.8 million, of which approximately $284.0 million was for new store development and approximately $110.8 million was for remodels and other additions. The Company has opened one store during the fourth quarter of fiscal year 2009 and currently expects to open two additional stores during the fourth quarter. During the forty weeks ended July 6, 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 August 4, 2009:

                                                                         Properties        Total
                                                                                          Leases
                                    Stores Opened    Stores Opened        Tendered        Signed
                                    During Fiscal    During Fiscal         as of           as of
                                                                                         August 4,
                                      Year 2008        Year 2009       August 4, 2009     2009(1)
Number of stores (including
relocations)                                   20               13                 19           55
Number of relocations                           6                6                  1            7
Number of lease acquisitions,
ground leases and owned
properties                                      4                4                  4            4
New areas                                       3                1                  4            8
Average store size (gross square
feet)                                      53,000           52,400             42,100       45,700
As a percentage of existing
store average size                            146 %            142 %              114 %        123 %
Total square footage                    1,060,700          681,600            800,000    2,546,800
As a percentage of existing
square footage                                 11 %              7 %                8 %         24 %
Average tender period in months               9.7             13.2
Average pre-opening expense per
store                                $2.5 million     $3.0 million (2)
Average pre-opening rent per
store                                $1.1 million     $1.1 million (2)
Average development cost            $15.8 million
Average development cost per
square foot                                  $297

(1)Includes leases for properties tendered.

(2)For stores opened during quarter 1 through 3 of fiscal year 2009

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 55 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:

. . .