Conference Call Scripts

2008

• November 5 - 4th Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are 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 availability of capital, the successful resolution of ongoing FTC matters, and other risks detailed from time to time in the SEC reports of Whole Foods Market, including Whole Foods Market’s report on Form 10-K for the fiscal year ended September 30, 2007. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data. Please note that the fourth quarter this year was 12 weeks versus 13-weeks last year, and that our earnings results include Wild Oats for the entire quarter versus the last five weeks of the quarter last year. We have adjusted percentage increases to exclude the extra week to allow for proper year-over-year comparisons.

    I hope you have had a chance to read our press release. We recognize that this quarter is a bit confusing given the higher than ordinary effective tax rates for the quarter and the year as well as various unusual charges. We have broken out these charges in dollar and per share amounts, and have broken out the estimated impact of the Wild Oats stores to highlight the results of our existing stores.

    I will first recap our results then turn to our announcement of $425 million in new equity financing and our updated outlook for fiscal year 2009.

    For the fiscal year, sales grew a healthy 24 percent, driven by comparable store sales growth of 5 percent.

    For the fourth quarter, sales increased 16 percent to $1.8 billion, excluding $49 million in sales from the 35 subsequently divested Henry’s and Sun Harvest stores and 13 of the subsequently closed Wild Oats stores in the fourth quarter last year. Comparable store sales grew 0.4 percent versus an 8.2 percent increase in the prior year, and identical store sales declined 0.5 percent, versus a six percent increase in the prior year.

    These are challenging economic times and Whole Foods Market is not immune to the country’s economic issues. U.S. retail sales declined in September, the third consecutive monthly decline and the first such consecutive three-month decline in more than a decade. We believe our core customers remain committed to Whole Foods; however, the unrelenting negative economic news appears to be shifting buying behavior to making fewer trips and to making more value conscious decisions. For comparable stores, our transaction count declined approximately 1.5 percent and average basket size increased approximately two percent in the quarter.

    While some regions still performed relatively well, with idents in the low-to-mid single digits, idents in every region decelerated from Q3. Cannibalization continues to negatively impact our comps, although to a lesser degree than in Q3. And, as you would expect, markets that have seen the sharpest real estate downturns, such as Southern California, Las Vegas, Phoenix and Florida, have seen the greatest negative impact.

    The Whole Foods Market brand stands for the highest quality, and over the last several years we have worked hard to increase the value choices within our grocery and Whole Body departments without sacrificing our standards. We believe our efforts have been successful since these departments are continuing to produce positive comps. While we saw a decline in average transactions in grocery, our average basket size was up, which we believe is a reflection that customers are making fewer trips but stocking up with more on each trip.

    Our Whole Deal program, launched in July, has helped to highlight the values we offer within perishables. The program includes a quarterly in-store guide providing specially priced product discounts, money-saving coupons and tips, as well as budget recipes. For the July through September period, we saw a lift on all items included in the Whole Deal program with perishables driving a significant majority of the sales lift.

    There are some signs of customers trading down within the store as evidenced by sales in our own brands growing three to four times that of branded product.

    While we realize we are not going to change perceptions overnight, our efforts are gaining some traction in the media, which we hope will help positively reinforce to our existing customers that we are offering great values in terms of high quality at a competitive price, as well as helping to educate and entice prospective new customers as well.

    At the same time we are trying to help meet our customers’ needs by increasing our value offerings, we also are fighting rising food costs, which is having some negative impact on our gross margin. For stores in the identical store base excluding Wild Oats stores, our gross profit in Q4 decreased 106 basis points primarily due to higher occupancy costs driven by an increase in utilities and property taxes as a percentage of sales, and, to a lesser degree, increases in cost of goods sold as a percent of sales. We believe that strengthening our value image throughout the store is the right strategy over the short and long term, and we are making positive strides in differentiating our product selection, with a major emphasis on expanding offerings under our own label, our control brands and exclusive branded products. Our SKU count for offerings under our own label increased 27 percent year over year to just under 2,600, with sales at 21 percent of our total grocery and Whole Body sales, and we now have close to 300 exclusive branded products with another 20 percent in the pipeline

    We are pleased to announce that Michael Besancon, former president of our Southern Pacific region, has accepted the newly created position of Senior GVP of Purchasing, Distribution and Marketing, reporting to our co-Presidents, Walter and AC. Our goal with this new position is to create a collaborative vision for our purchasing, marketing and distribution teams at the regional and global levels. With over 30 years of experience in purchasing, Michael has created a regional program that has produced strong margins primarily through offering differentiated products and effectively telling the story behind the products within the store. We are excited about Michael spreading his vision and best practices throughout the company.

    Our identical stores continue to deliver healthy improvement, despite decelerating sales, in direct stores expenses, which decreased 43 basis points in the quarter primarily driven by leverage in wages.

    We opened eight new stores, including two relocations in the fourth quarter. These stores averaged 52,000 square feet and included three new markets – Venice, California, Honolulu, Hawaii, and Richmond Virginia. Our Venice Beach store is off to a very strong start, ranking as the highest volume store in our Southern Pacific region. We also opened our first of four stores in Hawaii. Our Honolulu store, located in Kahala Mall, opened with over 20 percent of its inventory in local product which has been a key factor in differentiating our store from the competition and has been a big hit with customers. At just under 30,000 square feet, the store is producing excellent sales per square foot.

    For the quarter, our 26 new and relocated stores averaged 54,000 square feet in size and were approximately seven months old. They produced average weekly sales of $582,000, translating to sales per square foot of $553. As a class, our new stores during the quarter produced a higher store contribution as a percentage of sales than our class of new stores in Q4 last year, and accounted for approximately nine percent of our core sales versus 10 percent last year.

    We are now one year into our merger with Wild Oats, and as with many of our past mergers, we have made many of the up-front investments in product quality, labor, pricing and repairs and maintenance to raise the overall shopping experience in the Wild Oats stores up to our standards. Sales at the 55 continuing Wild Oats stores for the quarter were $159.3 million, and comparable store sales growth for the last four weeks of the quarter was 4.6 percent. Continuing stores produced a 54 basis point improvement in store contribution from the third quarter. To date, 45 Wild Oats stores have been re-branded. The estimated dilutive impact from Oats was approximately $0.09 per share in the quarter. The higher dilution run rate is primarily due to non-operating charges of approximately $0.06 per share relating to idle Wild Oats properties and asset impairments at two continuing Wild Oats locations.

    For the quarter, our effective tax rate was 90.3 percent, net income was $1.5 million, and diluted earnings per share were $0.01. These results include approximately charges of $0.15 per share that were not part of our guidance as follows:

    1. Idle Wild Oats Properties. We increased our store closure reserve for 40 closed Wild Oats stores by $14.7 million, or 27 percent, to $64 million. These increases in the reserves for estimated higher net lease obligations were required due to the downturn in the real estate market and economy in general. Because these adjustments are reflective of current market conditions, rather than conditions existing at the date of acquisition, this $14.7 million, or $0.05 per share, was expensed rather than allocated to goodwill.
    2. Tax rate. Our higher rate for the quarter was primarily due to the repatriation of $60 million in cash from our Canadian subsidiary and a catch-up adjustment to bring our effective rate for the year to 41.6 percent which impacted earnings by $0.05 per share.
    3. Lease terminations. We recorded approximately $5.5 million, or $0.02 per share, in non-cash charges related to 13 lease terminations of Whole Foods stores that were in development.
    4. Asset impairments. We recorded approximately $1.5 million, or $0.01 per share, in non-cash charges to write down assets for two Wild Oats locations based on current expectations of future cash flows for these locations, which were not sufficient to support our recorded asset balances.
    5. Closure costs. Relocation, store closure and lease termination expense included $2.6 million, or $0.01 per share, related to the closure of two regional bake houses and one Fresh & Wild store in Bristol, England.
    6. Legal costs. G&A expenses include $2.5 million, or $0.01 per share, in legal costs related to the FTC lawsuit.

    Approximately $75 million relating to depreciation and amortization, share-based payments, LIFO and deferred rent was expensed for accounting purposes but was non-cash. We produced approximately $82 million in EBITDA and $97 million in earnings interest, taxes, depreciation and amortization and other non-cash expenses, or EBITANCE.

    While we are still producing strong cash flow, the challenging economic environment is negatively impacting our sales and bottom line. The uncertain environment, combined with our commitment to maintaining financial flexibility and investing prudently in our long-term growth, has led us to announce that we have raised $425 million of additional equity from the sale of Series A Preferred Stock to Green Equity Investors V, L.P., an affiliate of Leonard Green & Partners, L.P.

    We are pleased that Leonard Green & Partners, one of the most experienced and successful investors in the retail industry, has decided to make such a significant investment in Whole Foods Market. We view it as a strong vote of confidence in our business model and our long-term growth prospects, despite the tough current economic environment.

    This equity infusion, combined with our strong cash flow from operations, gives us the financial flexibility to manage through these difficult economic times while continuing to prudently invest in our long-term growth. From both an operational and capital expenditures standpoint, we have confidence that our current store development pipeline of 66 stores is very manageable over the next four years.

    Now, I will turn to our updated outlook for fiscal year 2009.

    For the first five weeks of the first quarter ended November 2, 2008, comparable store sales decreased 2.1 percent versus a 9.0 percent increase in the prior year, and identical store sales decreased 3.3 percent versus a 6.7 percent increase in the prior year.

    The uncertain and rapidly changing makes it very difficult to forecast future results; therefore, we are not providing comparable store sales growth guidance at this time. However, flat comparable store sales assumptions, combined with the expectation of eight net new store openings, would translate to total sales in the range of $8.3 billion for fiscal year 2009.

    While year-over-year comp comparisons are very difficult in the first half of the year, at 9.3 percent in the first quarter, they become less difficult on a quarterly basis throughout the year.

    Based on these sales assumptions, along with the more detailed guidance provided in our press release, we estimate EBITDA in the range of $525 million to $545 million and EBITANCE in the range of $580 million to $605 million. Diluted earnings per share are estimated to fall in the range of $0.95 to $1.00, excluding approximately $0.06 to $0.08 per share in estimated dilution from FTC-related legal costs and an estimate $0.19 per share impact from the Preferred Series A stock.

    To conclude, these are certainly challenging economic times. We are hopeful that our sales trends will stabilize and improve as we continue to execute on our differentiation strategy while gaining increasing credit for the value that we offer. And, while we cannot completely control the impact of the economy on our sales, we can control many of our costs. We have the financial flexibility to manage through these difficult economic times while continuing to prudently invest in our growth. From both an operational and capital expenditure standpoint, we consider our current store development pipeline of 66 stores to be very manageable over the next four years. We are an adaptive and resilient company that will continue to adapt in a prudent manner to these uncertain economic times.

    We will now take your questions but ask that you limit your questions so that everyone has an opportunity to participate. Thank you.

• August 5 - 3rd Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are 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, changes in the availability of capital, the successful resolution of ongoing FTC matters, and other risks detailed from time to time in the SEC reports of Whole Foods Market, including Whole Foods Market's report on Form 10-K for the fiscal year ended September 30, 2007. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    Whole Foods has experienced tremendous success over our twenty-eight year history. We have a strong customer base that is aligned with our mission and our core values. We are dedicated to maintaining our leadership position as the authentic retailer of natural and organic foods. We recently announced our newly enhanced farmed seafood standards, becoming the first food retailer to require that our vendor partners successfully pass an independent, third-party audit to ensure compliance with our standards. These enhanced standards were created to minimize environmental impacts and are the end result of two years of hard work by our quality standards team. We believe it is this commitment to continuing to raise the bar that reinforces our authenticity and makes us the choice for customers aspiring to a healthier lifestyle. Our business model has been highly successful, and with fewer than 300 stores today, we remain very bullish on our long-term growth prospects, as the market for natural and organic products continues to grow and as our company continues to evolve.

    Today's economic environment, however, is the most challenging I have experienced in my thirty years in retail. Consumer confidence for June hit its lowest level in more than a decade. American consumers are spending less as they are feeling the squeeze from more expensive fuel and food on one side, to lower home values and less available credit on the other.

    Our sales grew 22 percent in the third quarter. We reported sales growth in comparable stores and identical stores of 2.6 percent and 1.9 percent, respectively. Our comp increase was almost entirely driven by increased average basket size with only a slight increase year over year in our transaction count.

    Cannibalization continues to negatively impact our comps, but the estimated negative impact in the quarter was not significantly different than in Q2. While some regions still performed well, with idents in the mid-to-high single digits, idents in every region decelerated from Q2. We believe that the economic hardships consumers are facing are impacting their behavior in various ways, from making fewer trips to making more conscious value decisions.

    The Whole Foods Market brand stands for the highest quality, and over the last several years we have worked hard to increase the value choices within our grocery and Whole Body departments without sacrificing our standards. Last quarter, we announced our intent to do the same in our perishable departments.

    We have been doing a much better job of communicating both internally and externally the values that we offer. In July, we launched a new, national program called the "Whole Deal" which includes an in-store guide providing specially priced product discounts, money-saving coupons and tips, as well as budget recipes. In addition, several stores now have "value gurus" who lead customer tours highlighting our values as well as educating customers on how to stretch their food dollars by choosing our 365 private label brand, buying bulk, purchasing by the caseload, etc.

    We continue to make positive strides in differentiating our product selection, with a major emphasis on expanding our exclusive offerings in private label, control brands and branded products. Our SKU count increased 21 percent year over year to just over 2,300. Our private label sales continue to increase, currently representing 21 percent of our total grocery and Whole Body sales, up from 15 percent three years ago.

    At the same time we are trying to help meet our customers' needs by increasing our value offerings, we are fighting rising food costs, which is having some negative impact on our gross margin. However, for identical stores, our gross profit in Q3 was still a healthy 35.2 percent of sales versus near record gross margin of 35.6 percent last year. We attribute the 48 basis point decrease to some delays in passing on higher commodity costs, higher utility costs, and increased promotional activity year over year. We believe that strengthening our value image throughout the store is the right strategy over the short and long term, and we are fortunate that we continue to find many opportunities to lower our cost of goods sold to help minimize the gross margin impact.

    We were pleased to see our identical stores deliver a 36 basis point improvement in direct stores expenses driven primarily by leverage in wages.

    We are very pleased with the early sales in our five new stores opened over the last six weeks. Our Tribeca store, which is our fifth store in New York City, is off to an especially great start, setting a New York City record for opening day sales.

    For the quarter, our 22 new and relocated stores averaged 56,000 square feet in size and were 7.5 months old. They produced average weekly sales of $604,000, translating to sales per square foot of $560. As a class, our new stores during the quarter produced a higher store contribution as a percentage of sales than our class of new stores in Q3 last year, and accounted for approximately eight percent of our sales in both years. On the whole, our new and relocated stores continue to run ahead of our sales projections for the first year and are on track to reach our real estate investment hurdle rate of cumulatively positive EVA within seven years or less.

    Wild Oats' sales trends continue to improve, with comparable store sales growth of 5.4 percent for Q3 and 7 percent Q4 to date. We are seeing improvements in gross margin despite lowering prices throughout the store; however, the margin improvements are being offset by increased salaries and benefits which are continuing to have a negative impact on store contribution. We are still less than a year into this merger, and as with many of our past mergers, we are making up-front investments in product quality, labor, pricing and repairs and maintenance to raise the overall shopping experience in the Wild Oats stores up to our standards, and these costs are in advance of what we expect to be a significant long-term improvement in sales. In the 38 stores we have re-branded thus far, we have seen sales growth double from six percent before re-branding to 12 percent after. We expect these stores to continue to show improving sales this year and higher comparable store sales growth in fiscal 2009. The dilutive impact from Oats was approximately $0.03 in the quarter.

    We are disappointed in our results in the U.K. Over the last four quarters, our UK operations lost approximately $18.4 million before tax, or $0.09 per share. Results have shown some improvement, and our annual run rate during the last two quarters was approximately $16 million. We are carefully evaluating all aspects of our operations in the U.K., and expect steady year-over-year sales growth at our Kensington store to help drive further improvement. Our goal is to reduce our operating losses to $13 million in fiscal year 2009, $7 million in fiscal year 2010, and to approach break even in fiscal year 2011.

    To put the U.K. results into context, we thought it might help to relate it to our experience in Canada, which was our first experiment outside of the U.S. We initially lost money in Canada; however, our stores there continue to grow and improve each year and are now very profitable. Our Canadian operations contributed $14.6 million, or $0.07 per share, over the last four quarters, almost offsetting our losses in the U.K. We believe the long-term growth potential in the U.K. is much greater than in Canada and expect our investment to deliver strong returns over the long term.

    In Q3, we produced approximately $122 million in EBITDA and $135 million in earnings interest, taxes, depreciation and amortization and other non-cash expenses, or EBITANCE.

    While we are still producing strong cash flow, the challenging economic environment appears to be negatively impacting our sales and bottom line. This, combined with our commitment to maintaining financial flexibility and investing prudently in our long-term growth, has led us to announce the following proactive strategy:

    We are lowering our expected new store openings in fiscal year 2009 to 15 from our prior range of 25 to 30. While we were ready to execute on the acceleration in our store openings, we now wish to take a more conservative approach to our growth and business strategy over the short term.

    We have cut all discretionary capital expenditure budgets not related to new stores by 50 percent. We believe our existing store base is in very good shape based on our philosophy of continual investment and do not expect this decision to have any negative consequences over the short term in terms of our customers' in-store shopping experience.

    We are focused on the right size store for each market and, since announcing in Q3 of 2007 our intent to decrease the size of several leases in development, we have downsized eight leases by an average of 9,000 square feet each. Throughout our history, we have continued to push the envelope on store size. When we opened our enormously successful 80,000 square foot store in Austin, it had a ripple effect on store size and format throughout the company. With hindsight, reflection, and some data points in front of us, we see that the really large stores are very powerful in limited markets and circumstances, and that smaller stores can also produce great returns for us. We believe that a store size of 35,000 to 50,000 square feet is more appropriate in most circumstances to maximize return on investment and EVA, and we expect the majority of our stores to fall within that range going forward. We are also actively working to drive down the average development cost per square foot.

    G&A was 3.3 percent of sales in Q3, reflecting certain cost containment measures that have already been implemented. For fiscal year 2009, we expect G&A to return to our historical levels of approximately 3.2 percent of sales.

    We are also announcing the suspension of our cash dividend. At this time, we no longer have excess cash available to distribute to our shareholders, as that cash is needed to fund our growth going forward.

    We believe that through these decisions, which we have not undertaken lightly, our company will emerge stronger and better positioned to realize our growth potential and fulfill our long-term mission and core values.

    Now, I will turn to our guidance for the remainder of fiscal year 2008, and to our early assumptions for fiscal year 2009. We believe these are unusual times and that in order to set appropriate expectations, we are giving more guidance than we typically do.

    If our comparable store sales growth for the fourth quarter is in line with or slightly below our quarter-to-date results of 1.5 percent, this would result in comparable store sales growth for fiscal year 2008 of approximately five percent.

    Total sales growth, on a 52-week to 52-week basis, would be approximately 12 percent for the fourth quarter and approximately 23 percent for the fiscal year. Please note that the prior year included five weeks of sales from the subsequently closed Wild Oats and divested Henry's and Sun Harvest stores.

    Based on these sales assumptions and the expense guidance outlined in our press release, we expect EBITDA in the range of $98 million to $102 million for the fourth quarter, resulting in a range of $501 million to $505 million for the full fiscal year. EBITANCE is expected to be in the range of $113 million to $117 million in the fourth quarter, resulting in a range of $559 million to $563 million for the full fiscal year. We expect diluted earnings per share in the range of $0.13 to $0.15 for the fourth quarter, bringing the full year to $0.93 to $0.95 per share.

    We are providing the following preliminary assumptions and expectations for fiscal year 2009, which we expect to update with our fourth quarter earnings announcement in early November.

    Assuming no dramatic change in economic trends, we are planning for total sales growth in fiscal year 2009 of 6 percent to 10 percent. We expect comparable store sales growth of 1 percent to 5 percent and identical store sales growth of zero percent to 4 percent. Year-over-year square footage growth is expected to be approximately 7 percent, based on 15 new store openings, of which approximately six will be relocations.

    Based on these sales assumptions along with the more detailed guidance provided in our press release, we expect EBITDA in the range of $560 million to $580 million and EBITANCE in the range of $625 million to $650 million. We expect diluted earnings per share in the range of $1.08 to $1.14, a 15 percent to 20 percent increase year over year. This includes an estimated $0.07 to $0.09 per share in dilution from Wild Oats and approximately $0.06 per share in dilution from our U.K. operations.

    We are hopeful that sales trends will stabilize and then improve as we continue to execute on our differentiation strategy while gaining increasing credit for the value that we offer. We cannot completely control the impact of the economy on our sales, but we can control our costs. With our renewed focus on expense control, the reduction in our store openings and discretionary capital expenditures, and the reinvestment in our balance sheet through a suspension of our dividend, we are committed and focused on delivering strong EBITANCE and earnings growth in fiscal year 2009 and beyond. We are an adaptive and resilient company that will adapt in a prudent manner to these uncertain economic times.

    We will now take your questions but ask that you limit your questions so that everyone has an opportunity to participate. Thank you.

• May 13 - 2nd Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the successful integration of acquired businesses into our operations, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 30, 2007. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release which is quite comprehensive. On today’s call, I will highlight the results of our core stores, discuss the estimated impact of the Wild Oats stores, and give you a progress report on the integration. I will then speak to current trends and what we expect going forward.

    Our total sales increased 28 percent to $1.9 billion. Sales, excluding Wild Oats, increased 16 percent to $1.7 billion driven by 15 percent ending square footage growth and 6.7 percent comparable stores sales growth. Identical store sales, which exclude four relocated stores and two major expansions, increased 5.1 percent. We continue to see healthy increases in both transaction count and basket size. Our comp breakout was split roughly 50 / 50, with an average basket in Q2 of $35 and average transactions per week of 3.7 million. Our average weekly sales per store, excluding Wild Oats, increased 5.7 percent to $671,000, translating to sales per square foot of $922.

    We are continuing to gain market share at a much faster rate than our competition as evidenced by our comps and sales per square foot which continue to run well above that of average U.S. food retailers. Given these unusual economic times, however, we offer some general observations on our comps during the quarter.

    We reported a 6.7 percent comp for Q2 after reporting an 8.9 percent comp for the first four weeks of the quarter. During the quarter, our weekly comps varied dramatically from week to week, and we faced tougher comparisons throughout the quarter. Mid-way through the quarter, we also cycled over the opening of our relocated Portland, Maine store, previously our second biggest contributor to comps behind Kensington, so our change in comparable store sales growth from Q1 to Q2 was greater than our change in identical store sales growth.

    As is always the case, some regions comped below the chain average and some comped as high as the low double-digits. Results varied based on many factors, including differing degrees of cannibalization from new stores, competition, and changes in the economy, making it hard to attribute our performance to one factor over another.

    We do believe we have experienced a greater amount of cannibalization this year related to the acceleration in our new store openings. Despite the short-term negative impact however, our experience has typically been that our new stores average positive comps in their first full quarter in the comp base after opening, and by then our cannibalized stores are back to positive comps as well, reflecting our increased market share and making this the right growth strategy for us.

    We are continuing to make selective price investments. We believe that strengthening our price image on commodity-type branded products to broaden our appeal is not only the right long-term strategy, but the right short-term strategy particularly in today’s market. We are fortunate that we continue to find many opportunities to lower our cost of goods sold to help offset these price investments and minimize the gross margin impact.

    In addition, we continue to expand our private label offerings, with SKU count increasing 15 percent year over year to just over 2,200. Our private label sales continue to increase, currently representing 22 percent of our total grocery and Whole Body sales, up from 15 percent three years ago.

    For all stores, excluding Wild Oats, our gross profit in Q2 increased 36 basis points to 35.5 percent of sales, slightly above our five-year range for the second quarter of 35.3 percent. We are very pleased to be producing such strong results, and given the current environment, we plan to be more aggressive in expanding the availability of our value items, particularly in the perishable areas.

    We continue to have a market-based pricing strategy. We are generally priced in line on like items to many supermarket peers and at a premium when the quality or uniqueness of an item allow for that. Food inflation is running upwards of four percent in the U.S., and we are impacted by rising food costs as all food retailers are. We tend to follow the market in terms of passing on or absorbing these higher costs, but our retail price increases in the second quarter were below the U.S. average.

    The impact of the acceleration in our new store openings as well as continuing increases in health care costs as a percentage of sales in our existing stores is continuing to show up in our direct stores expenses, which increased 49 basis points to 26.4 percent of sales.

    For the quarter, our 22 new and relocated stores averaged 57,000 square feet in size and were 7.4 months old. They produced average weekly sales of $661,000, translating to sales per square foot of $604. As a class, our new stores during the quarter produced a higher store contribution as a percentage of sales than our class of new stores in Q2 last year, but they accounted for 10 percent of our sales, up from seven percent last year. On the whole, our new and relocated stores continue to run ahead of our sales projections for the first year and are on track to reach our real estate investment hurdle rate of cumulatively positive EVA within seven years or less.

    For stores in the identical base, which averaged 7.7 years of age and 36,000 square feet in size, Q2 gross margin improved 65 basis points and direct store expenses improved 10 basis points, resulting in a 75 basis point increase in store contribution.

    G&A expenses increased to 3.7 percent of sales. This was largely due to the costs of integrating and supporting the Wild Oats stores, as well as front-loaded G&A expenditures to support our 2008 and 2009 growth. We expect G&A costs in fiscal year 2009 to return to historical levels.

    Income before pre-opening and interest was down from last year as a percentage of sales due primarily to the increase in G&A offsetting strong results in identical stores; however, we had a solid 87 basis point sequential improvement to 5.4 percent of sales in the second quarter from 4.6 percent in the first quarter.

    I will now turn to the estimated impact of Wild Oats on our results.

    We closed four stores subsequent to the end of the quarter. Sales for the 58 continuing Wild Oats stores for the quarter were $169 million, and identical store sales growth was 5.9 percent. The continuing stores, averaging 24,000 square feet in size and 9.3 years of age, had average weekly sales per store of $243,000, sales per square foot of $523 and store contribution of $3.8 million, or 2.3 percent of sales. This was down from 3.5 percent in the first quarter due primarily to a 179 basis point increase in salaries and benefits as a percentage of sales which was partially offset by a 72 basis point improvement in gross margin.

    Regarding margins, we completed the conversion of all Wild Oats stores to our purchasing and information systems during the second quarter, but at the start of the quarter, less than 40 percent of the stores had been converted. These conversions were critical to managing our store-level inventory, pricing and merchandising programs, and should be a driver of stronger margin gains in the future. Regarding the increase in salaries and benefits, the Wild Oats team members transitioned to our payroll and benefits plan on January 1, so the stores had a full-quarter impact of our higher payroll and benefits load in the second quarter versus only a three-week impact in Q1.

    As with many of our past mergers, we are making up-front investments in labor, pricing and repairs and maintenance to raise the Wild Oats stores up to our standards, and these costs are in advance of what we expect to be a significant long-term improvement in sales. We continue to expect store contribution in the Wild Oats stores to improve in the second half of the fiscal year.

    We made substantial progress reducing G&A expenses at the Wild Oats home office during the second quarter. The number of corporate positions in Boulder dropped to 27 at the end of Q2 from 87 at the end of Q1, and as of today, only five corporate positions remain. We continue to expect G&A expenses to be substantially eliminated by the end of the fiscal year, with the exception of $2 to $3 million per quarter of rent and other expenses that will transfer to become part of our global and regional office G&A starting in June.

    Integrating acquisitions is generally a two-year process. In addition to completing the conversion of the Wild Oats stores to our purchasing and information systems in the second quarter, we have so far re-branded 27 Wild Oats stores – five stores in the first quarter, 13 in the second quarter and nine so far in the third quarter. These stores are now selling a full selection of WFM product in perishables and non-perishables, and we are excited about the notable improvements we are seeing in the year-over-year sales increases following re-branding. Sales growth at the re-branded stores has accelerated from six percent on average before re-branding to 12 percent after. We expect to have most all of the Wild Oats stores re-branded by the end of the fiscal year, and we expect these stores to continue to show improving sales this year and higher comparable store sales growth in fiscal 2009 and beyond.

    Now I will turn to a summary of our guidance for fiscal year 2008.

    Our guidance for fiscal 2008 is for sales growth of 25 to 30 percent and comparable store sales growth of 7.5 to 9.5 percent. We expect the spread between comparable store sales growth and identical store sales growth to decline over the remainder of the year, as the number of relocations and major expansions drops to two by the end of fiscal 2008 from seven at the end of fiscal 2007. Excluding the Wild Oats stores, we expect sales growth of 15 to 20 percent for the fiscal year.

    For the first four weeks of Q3, comparable store sales growth was 5.7 percent, a deceleration from the second quarter that was due in large part to the relocated Portland, Maine cycling over its opening and the Kensington store being removed from the comparable store base for the first several weeks in the third quarter. Identical store sales growth was 5.0 percent for the first four weeks of Q3, and comparable sales at the 58 continuing Wild Oats stores increased 5.6 percent.

    Based on our 8.2 percent year-to-date comparable store sales growth, we are maintaining our comp guidance of 7.5 percent to 9.5 percent for the fiscal year.

    We have opened eight stores through the second quarter and one store so far in the third quarter. We expect to open four more stores in the third quarter and up to eight stores in the fourth quarter.

    We do not expect to produce operating leverage for the year due primarily to a decrease in store contribution as a percentage of sales driven by a higher percentage of sales from new and acquired stores, investments in labor and benefits at the Wild Oats stores, and continued, though more moderate, increases in health care costs as a percentage of sales.

    In addition, we now expect G&A as a percent of sales for fiscal year 2008 to be slightly below our 3.6 percent average in the first half of the year. We expect G&A expenses as a percentage of sales in fiscal year 2009 to return to historical levels.

    Including the impact of Wild Oats, we expect to see a moderation in the year-over-year declines in income before pre-opening and interest as a percentage of sales during the second half of the fiscal year compared to the first half.

    Our company is focused on EVA, and we are comfortable with our current debt levels. We produce strong, consistent operating cash flow, and our credit line is available to fund our cash needs in excess of our cash flow from operations. We recently secured additional commitments totaling $100 million, and we expect to complete the increase of our credit line to $350 million in the third quarter. Currently, we have $88 million drawn on the line.

    Our business model is very successful and continues to benefit all of our stakeholders. We are continuing to produce higher sales, comps and sales per square foot than our public competitors, and the results in our core stores remain strong.

    Our goal is to produce sales of $12 billion in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve. We encourage our shareholders to stay focused on the long term.

    We will now take your questions but ask that you limit your questions so that everyone has an opportunity to participate. Thank you.

• February 19 - 1st Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the successful integration of acquired businesses into our operations, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 30, 2007. The Company does not undertake any obligation to update forward-looking statements.

    On today's call we will also speak to certain non-GAAP financial measures which are defined and reconciled in our earnings press release which is available on our website.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release which is quite comprehensive. On today's call, I will highlight the results of our core stores, discuss the estimated impact of the Wild Oats' stores, and give you a progress report on the integration. I will then speak to current trends and what we expect going forward.

    Our total sales increased 31 percent to $2.5 billion. Sales, excluding Wild Oats, increased 18.6 percent to $2.2 billion driven by 19 percent ending square footage growth and 9.3 percent comparable stores sales growth, which was on top of a seven percent increase in the prior year. Identical store sales, which exclude five relocated stores and three major expansions, increased 7.1 percent on top of a 6.2 percent increase last year. We are continuing to see a sequential decline in our two-year comps and idents, as we are still cycling over the double-digit comps we produced in the first half of fiscal year 2006.

    Our comp breakout is roughly in line with our historical 60 / 40 percent split between the increases in transaction count and basket size. Our average transactions per week increased approximately five percent to 3.5 million, and our average basket size increased approximately four percent to $36. The increase in basket size was due to an increase in the average price per item as has been the case over the last six quarters. Our average weekly sales per store, excluding Wild Oats, increased 8.4 percent to $672,000, translating to sales per square foot of $930.

    We continue to expand our private label offerings. SKU counts increased 15 percent year over year to just over 2,200 SKUs and currently represent 19 percent of our total grocery and Whole Body sales.

    We opened six new stores during the first quarter, including a 49,000 square foot store in Napa next door to a Trader Joe's. We have successfully implemented a very aggressive and well-communicated competitive strategy, with price matching and value at every turn. The Napa store has only been open for one month but is producing very strong sales per square foot and gross margin, and we believe it is a great example of our ability to remain true to our core values and quality standards while delivering compelling values within our product offering.

    For the quarter, our new and relocated stores averaged 57,000 square feet in size and were just over six months old. They produced average weekly sales of $694,000 translating to sales per square foot of $630. Our new and relocated stores open at least one year continue to run ahead of our sales projections for the first year and are on track to reach our real estate investment hurdle rate of cumulatively positive EVA® within seven years or less.

    For all stores, excluding Wild Oats, our gross profit, direct store expenses and store contribution were outside of our five-year ranges and averages; however, we attribute this to the acceleration in our new store openings last fiscal year of which we are seeing the full impact this year. In the first quarter this year, we had 24 new and relocated stores that accounted for 11 percent of our sales compared to the prior year, when we had 13 new and relocated stores that accounted for seven percent of our sales.

    As you know, we typically report gross margin, direct store expenses and store contribution for all stores and then break out stores in the comp base separately to highlight both the performance of our existing stores and the negative impact of our new stores, which tend to initially have lower gross margin and higher direct store expenses as a percentage of sales. Given that relocations are "new stores" but are included in comps and given that the number of relocations we have opened has increased, we believe that breaking out identical stores is a better indicator. For stores in the ident base, which averaged 7.9 years of age and 35,400 square feet in size, gross profit improved 42 basis points and direct store expenses improved 45 basis points, resulting in an 88 basis point increase in store contribution.

    G&A expenses increased 41 basis points to 3.4% of sales primarily due to an increase in legal and professional fees, along with an increase in wages at the regional and global offices.

    Excluding the estimated impact of the Wild Oats acquisition, adjusted net income was $51.0 million, and adjusted diluted earnings per share were $0.36.

    I will now turn to the estimated impact of Wild Oats on our results.

    Sales at Wild Oats were $239 million in the first quarter, or 9.7 percent of total sales. We closed 12 stores during the quarter, including a remodel that will re-open later this year, ending the quarter with 62 stores. Sales for the 62 continuing Wild Oats stores were $228 million, and identical store sales growth was 8.6 percent. The continuing stores, averaging 24,000 square feet in size and 9.4 years of age, had average weekly sales per store of $230,000, sales per square foot of $495 and store contribution of $7.9 million, or 3.5 percent of sales.

    We estimate the negative impact of Wild Oats on our total results was approximately $20 million pre-tax, of which $12.7 million related to interest expense and amortization of intangibles, $2.8 million related to losses at the closed locations, $2.4 million related to accretion of the store closure reserve and other store closure costs, and $9.9 million related to the Wild Oats home office in Boulder. This translates to a negative impact of $12 million on net income, or $0.08 per share. Our estimate excludes certain unquantifiable synergies and costs.

    The interest expense, amortization expense and accretion of the store closure reserve will continue throughout the year. We also expect some additional store losses related to the closing of up to three additional Wild Oats stores in connection with nearby Whole Foods Market store openings in the second half of fiscal year 2008; however, the headcount at the Boulder home office has already decreased from 87 at the end of Q1 to 56 currently, and we expect to see the Wild Oats G&A expenses decline substantially in the second and third quarters and be essentially eliminated by the end of the fiscal year. Note that a small portion of this expense will transfer to the Rocky Mountain and other regional offices.

    The point I want to underscore is that, as with many of our past mergers, we are making upfront investments to raise the Wild Oats stores up to our high standards, including investments in repairs and maintenance of the stores, lower prices, an expanded perishables offering, and increased labor, and these costs are in advance of what we expect to be a significant long-term improvement in sales. We are encouraged that the remaining stores are producing positive store contribution, and we expect to see continuous improvement as we move further along in our integration process.

    Wild Oats was a highly centralized company, thus we have taken a cautious approach to "unplugging" the stores from Boulder. We commented during our last call about starting with the culture. I think our regional leadership has done a great job of establishing trust and creating a connection with the Wild Oats team members. This has resulted in very high morale within the stores, to a degree above what we have experienced relative to any of our past mergers.

    During the first quarter, we began the transition in human resources and information technology. At the beginning of the calendar year, we transitioned all of the Wild Oats team members to our payroll and benefits plans, and as of the end of the quarter, we had converted 23 of the 62 Wild Oats stores to our purchasing and information systems. Since then, another 23 stores have converted, and we expect the remaining stores to convert by the end of the second quarter. The systems conversion is critical to managing inventory, pricing and merchandising programs in the stores. Once converted, store leadership is empowered and can work together to improve the financial performance of the stores. It will take some time for the new processes to be fully internalized, but we expect continuous improvement during the fiscal year.

    We have already touched on some of the low hanging fruit in terms of adding our product into the stores, upgrading perishables, and lowering prices, but we expect the real sales payoff to occur once we remodel, upgrade and rebrand the stores. Toward the end of the first quarter, we re-branded five stores in Raintree, Arizona; Long Beach, California; West Hartford, Connecticut; Westport, Connecticut; and Andover, Massachusetts. So far in the second quarter, we have re-branded four additional stores in Glendale, CO; Superior, Colorado; Hinsdale, IL; and Park City, UT. These stores are selling a full selection of WFM product in perishables and non-perishables, and we are excited about the notable improvements we are seeing in the year-over-year sales increases following the rebranding. We expect to have almost all of the Wild Oats stores re-branded by the end of the year.

    In just 25 weeks, our integration has gone faster, further, and deeper than in any of our prior mergers, and we feel very positive about the results we have seen so far. We continue to expect these stores to drive strong sales this year and higher comparable store sales growth in fiscal 2009 and beyond.

    In our earnings release we have introduced an updated version of EBITDA that we are calling "EBITANCE" or earnings before interest, taxes and non-cash expenses. For the quarter, EBITANCE was $167.5 million or $1.19 per diluted share, compared to $147.9 million or $1.03 per diluted share in the prior year. We believe this measure better reflects the current accounting reality of significant non-cash expenses beyond depreciation and amortization such as share based compensation, deferred rent and LIFO.

    Now I will turn to a summary of our guidance for fiscal year 2008.

    Our guidance is for higher-than-average sales growth of 25 to 30 percent and comparable store sales growth of 7.5 percent to 9.5 percent. Excluding the Wild Oats stores, we expect sales growth of 15 to 20 percent for the fiscal year.

    For the first four weeks of the second quarter, comparable store sales growth was 8.9 percent, and identical store sales growth was 6.9 percent. Sales at the 62 continuing Wild Oats stores increased 6.2 percent. The Wild Oats stores had a substantial increase in one week's sales last year resulting from a company-wide promotion, making the comparison this year very difficult for that week. We estimate the negative impact on quarter-to-date Wild Oats sales growth from this, combined with the Naples store cycling over a strong opening last year, was approximately 2.5 percentage points.

    We realize there are a lot of questions out there about how a slowing economy might impact our sales. Historically, our sales have been highly resilient during economic downturns. We attribute our strong sales to many factors including our loyal core customers and their dedication to a natural and organic lifestyle, our high percentage of perishable product sales, and our extensive selection of high quality prepared foods that attracts customers trading down from restaurants. In addition, we sell a high percentage of relatively small-ticket items, and we are better positioned today than we ever have been from a value perspective. Given our prior experience, strong year-to-date comps, easier year-over-year comparisons, and the increased number of new stores entering the comp base, we are confident in reaffirming our comp guidance of 7.5 percent to 9.5 percent for the fiscal year.

    As for our ability to pass on higher food costs, we continue to have a market-based pricing strategy and historically have tended to follow the market in terms of passing on or absorbing these higher costs. To date, we haven't experienced anything different in this regard.

    We have opened six stores year to date. Of our 26 currently tendered stores, we expect to open two stores in the second quarter and up to 13 stores in the second half of the year.

    We do not expect to produce operating leverage for the year due primarily to a decrease in store contribution as a percentage of sales driven by a higher percentage of sales from new and acquired stores, which have a lower contribution than our existing stores, investments in labor and benefits at the Wild Oats stores, and continued, though more moderate, increases in health care costs as a percentage of sales.

    In addition, we expect G&A as a percent of sales to be in line with the 3.3 percent we reported in fiscal year 2007, due mainly to the temporary costs associated with integrating the acquisition; the cost of fully staffing our three smallest regions which gained the greatest number of stores in the merger as a percentage of their existing store base; and higher legal and professional fees. G&A as a percentage of sales should improve sequentially from the first half to the second half of the year.

    Our company is focused on EVA, and we are comfortable with our current debt levels. We produce strong, consistent operating cash flow, and our credit line is available to fund our cash needs in excess of our cash flow from operations. Currently we have $50 million drawn on our $250 million credit line. In the second quarter, we expect to expand our credit line to $350 million, as allowed under the accordion feature in our credit agreement, in anticipation of additional borrowings throughout the remainder of the year. These borrowings are contemplated in our interest expense guidance, net of investment and other income, of $35 to $40 million for the fiscal year.

    We recently signed six new store leases averaging 50,500 square feet in size and now have 89 stores under development totaling 4.6 million square feet, or 49 percent of our existing square footage. These stores average 51,500 square feet in size and include 22 relocations and 15 new markets. A large portion of our growth for the next few years is already "on the books," and I feel highly confident in our ability to deliver results.

    In other news, we were extremely pleased to learn last month that for the eleventh consecutive year we made FORTUNE's list of the "100 Best Companies to Work For." We are one of only 14 companies to be named every year since the list's inception.

    We also received an unprecedented amount of favorable publicity following our recent announcement to end the use of disposable plastic grocery bags at the checkouts in all of our 270 stores in the U.S., Canada and the U.K. with the goal of being plastic bag-free by Earth Day, April 22, 2008. Our effort was clearly aligned with our customers' values as evidenced by the sale to date of over 700,000 of our Better Bags which are made from recycled plastic bottles.

    Our business model is very successful and continues to benefit all of our stakeholders. We are executing at a high level, continuing to produce higher sales, comps and sales per square foot than our public competitors. We believe the investments we are making today in our new, acquired and existing stores will result in strong earnings growth in the future.

    Given our recent merger, strong historical sales growth, significant store development pipeline, and acceleration in store openings, we believe we are well positioned to achieve our goal of $12 billion in sales in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve. We have grown our stock price at an average compound annual rate of 20 percent since going public in 1992, and we encourage our shareholders to stay focused on the long term.

    We will now take your questions but ask that you limit your questions so that everyone has an opportunity to participate. Thank you.

2007

• November 20 - 4rd Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 24, 2006. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release. We recognize that this quarter is a bit confusing given the 13-week rather than 12-week quarter and that our results include Wild Oats for the last five weeks of the quarter. We have adjusted percentage increases to exclude the extra week to allow for proper year-over-year comparisons, and for several key metrics, we have broken out the estimated impact of the Wild Oats stores to highlight the results of our existing stores.

    I think I speak for everyone when I say words cannot fully express how excited we all are to have finally completed our merger with Wild Oats. We believe the synergies gained from this combination will create long-term value for our customers, vendors and shareholders, as well as exciting opportunities for our team members.

    All of our 11 operating regions gained stores, three of our smallest regions gained critical mass, and we gained immediate entry into 15 new markets and five new states. Over time, we expect to recognize significant synergies through G&A cost reductions, greater purchasing power and increased utilization of our facilities. Tremendous strides have already been made operationally and culturally thanks to the hard work and dedication of our team members, both existing and new.

    We are happy to say we were able to retain approximately 90 percent of the Wild Oats store team members and are in the process of transitioning these team members to our pay guidelines and progressive benefits package. An incredible amount of positive energy has been generated through Town Hall meetings, vision days, and training at the regions and in Austin.

    Customers in the Wild Oats stores are already experiencing an improved shopping experience thanks to the expanded product offerings, particularly on the fresh food side, as well as price cuts on over one thousand items. We are already directly sourcing and distributing produce, seafood, bakery and prepared food items to the stores, which has raised the quality of the perishable offerings significantly. We think customers will also respond positively to our in-store programs for the upcoming holidays.

    We sold the 35 Henry's and Sun Harvest stores on September 30th and have since closed nine of the Wild Oats stores, including one store that was closed in conjunction with the opening of a new Whole Foods Market store in the same area. We also temporarily closed two stores for major renovations, one of which is scheduled to re-open later this fiscal year. Of the 63 stores that currently remain, we plan to close one additional store in the first quarter and then close seven more stores over the next few years as we open nearby Whole Foods Market stores that are currently in development.

    We have started to make changes inside the stores including new packaging, equipment, signage, displays and team member aprons. We plan to invest $40 million to $50 million this year in Wild Oats remodels, and our regional presidents are working on plans for the renovations that will take place later this fiscal year after which we expect to re-brand the stores as Whole Foods Market stores. Some stores are planning to rebrand as soon as early 2008.

    For the five-week period, excluding the Henry's and Sun Harvest stores, sales from the 74 Wild Oats stores were $82 million. These stores, averaging 24,400 square feet in size and nine years of age, had average weekly sales of $214,000 per store and sales per square foot of $457 in the quarter. Of the 63 stores that currently remain open, averaging 24,400 square feet and nine years of age, average weekly sales were $224,000 per store and sales per square foot were $478.

    While the Wild Oats stores are older and smaller than our stores, we do believe that over time we will raise their sales productivity to levels in line with our stores. We have two historical examples of where we opened stores in Wild Oats locations that had closed due to poor performance, and subsequently significantly improved their sales. At one location, we saw a greater than six-fold increase in average weekly sales over a period of about five years, and at the other store, we saw an increase of just under five-fold over a period of about six years. While these results aren’t necessarily predictive of all the Wild Oats stores we acquired, they do help demonstrate the potential value we can produce over the long term.

    In a short time, our integration has gone faster, further, and deeper than in any of our prior mergers, and we feel very positive about the results we have seen so far. The Wild Oats stores open longer than a year, excluding the divested stores and the stores we closed in the first quarter, have shown a healthy increase in sales growth from 3.9 percent over the last five weeks of Q4 to 6.6 percent over the first seven weeks of Q1, and we expect these stores to drive strong sales this year and higher comparable store sales growth in fiscal 2009 and beyond.

    I will now turn to our results for the quarter, excluding the Wild Oats stores.

    Our sales increased 16 percent to $1.6 billion driven by 18 percent ending square footage growth and 8.2 percent comparable stores sales growth, which was on top of an 8.6 percent increase in the prior year. Identical store sales, which exclude six relocated stores and two major expansions, increased six percent. The spread between comps and idents increased 95 basis points in Q4 compared to Q3, primarily reflecting the inclusion of the Kensington relocation in London for the entire fourth quarter versus only three weeks in the third quarter, and the two additional relocations that opened in Q4. Year over year, average transactions per week increased approximately 5.5 percent to 3.5 million, and our average basket size increased approximately 2.5 percent to $33. Note the Wild Oats stores will not be included in the comp base until the 53rd week following the acquisition.

    Average weekly sales were $628,000 per store, excluding the Wild Oats stores, in the quarter, a 7.5 percent increase year over year, translating to sales per square foot of $892.

    We opened a record eight new stores during the quarter and a record 21 new stores during the fiscal year, a significant increase from the 13 new stores we opened in fiscal year 2006. We relocated five stores, entered three new markets and completely revitalized our brand image in the Chicago area with the addition of four new stores. Our new stores include a number of innovations that not only help us continue to redefine the marketplace but also create an incredible amount of excitement and positive momentum within our company.

    For the quarter, our new stores averaged 57,000 square feet in size and were just over six months old. They produced average weekly sales of $630,000 translating to sales per square foot of $573. Our new stores open at least one year continue to run ahead of our sales projections for the first year and are on track to reach our real estate investment hurdle rate of cumulatively positive EVA® within seven years or less.

    We are actively continuing to further differentiate our product offering in ways that speak to our authenticity and leadership role within natural and organic products. These initiatives include the continued expansion of our private label products which saw a 13 percent increase in SKU count year over year and currently represent 19 percent of our total grocery and Whole Body sales, our expanded "Buying Local" efforts and local product selection, our Whole Trade Program, and our new Five-Step Animal Welfare Rating Program which allows shoppers to easily understand how the animals from which the meat and poultry products they are buying were raised and treated.

    We were pleased to recently announce that we have now administered over $1 million in low-interest loans under our new Local Producer Loan Program. Loan recipients include small-scale food producers and growers from 12 states. Among their products are fresh produce, body care products, and artisan foods including nut butters, ice cream, granolas and cheeses.

    Our fourth quarter was very positive for the many reasons we have outlined, but we did see some expenses increase as a percentage of sales to levels higher than our historical averages. Excluding the Wild Oats stores, gross profit improved eight basis points; however, this improvement was offset by a 65 basis point increase in direct store expenses resulting in a 57 basis point decline in store contribution. For stores in the comparable store base, gross margin improved 27 basis points, and direct store expenses increased 23 basis points as a percentage of sales resulting in a four basis point improvement in store contribution as a percentage of sales. The $2.6 million LIFO charge in Q4 compared to the $0.6 million credit in Q4 last year negatively impacted gross margin by approximately 20 basis points.

    It is helpful to point out that in Q4 we had 25 new stores that averaged six months of age compared to the prior year, when we had only 15 new stores that averaged eight months of age. For stores in the comp base, the 23 basis point increase in direct store expenses in Q4 was in line with the year-over-year increase we saw in Q3 and was once again driven primarily by an increase in health care costs as a percentage of sales.

    Rising health care costs continue to be an issue for most businesses, and while our annual increases and our health care costs per team member are still well below industry norms, we are seeing health care costs continuing to grow. Our goal is to continue to educate our team members on how to best use the medical resources available, to avoid emergency room visits for less urgent care, and to encourage wellness programs and overall good health steps.

    Including Wild Oats, G&Amp;A expenses increased to 3.9 percent of sales primarily due to approximately $13 million, or $0.06 per diluted share, in costs related to legal matters, integration efforts and the addition of Wild Oats' G&Amp;A expenses. We continue to expect significant synergies through G&Amp;A cost reductions over time, but there will be some temporary costs associated with integrating the Wild Oats acquisition, along with the cost of fully staffing our three smallest regions which gained the greatest number of stores relative to their existing base in the merger.

    Now to turn to a summary of our guidance for fiscal year 2008:

    Our sales guidance is for higher-than-average sales growth of 25 to 30 percent, of which approximately 10 percent is expected to come from the Wild Oats stores, and comparable store sales growth of 7.5 percent to 9.5 percent.

    We expect to return to a more historical comp level, despite increasing competition, a greater degree of cannibalization, and the possible negative impact of any slowdown in consumer spending. This expectation is based on easier year-over-year comparisons, a higher number of new stores entering the comp base, the transfer of sales from some of the Wild Oats' store closures, and the 9.5 percent comps and 7.2 percent idents we have averaged quarter to date.

    In the first quarter, we have opened four new stores and plan to open two more stores. We have also permanently closed nine stores, temporarily closed two stores for major remodels, and plan to permanently close one additional store. We expect to end the first quarter with 270 stores. Fourteen of our tendered stores are scheduled to open this fiscal year, and we will announce additional stores tendered for openings this year with our Q1 earnings release in February. We expect to open approximately the same number of new stores this year as last year.

    We do not expect to produce operating leverage for the year due primarily to a decrease in store contribution as a percentage of sales driven by a higher percentage of sales from new and acquired stores, which have a lower contribution than our existing stores, investments in labor and benefits at the Wild Oats stores, and continued, though more moderate, increases in health care costs as a percentage of sales.

    In addition, we expect G&Amp;A as a percent of sales to be in line with the 3.3 percent we reported in fiscal year 2007, due mainly to the temporary costs associated with integrating the acquisition, along with the cost of fully staffing our three smallest regions which gained the greatest number of stores in the merger. G&Amp;A as a percentage of sales should improve sequentially from the first half to the second half of the year.

    We expect pre-opening expenses in the range of $80 million to $90 million, half of which relates to stores scheduled to open this fiscal year. On an average weekly basis, we expect quarterly pre-opening and relocation expense to ramp up throughout the year.

    Due primarily to the financing of the acquisition, we expect net interest expense in the range of $35 million to $40 million in fiscal year 2008.

    Capital expenditures for the fiscal year are expected to be in the range of $575 million to $625 million. Of this amount, approximately 65 to 70 percent relates to new stores opening in fiscal year 2008 and beyond and approximately seven to eight percent relates to remodels at the Wild Oats stores.

    Our company is focused on EVA, and given our strong, consistent operating cash flow, we are comfortable with our current debt levels and the utilization of our credit line to fund capital expenditures as well as future dividends and any potential stock repurchases. In fact, today we are pleased to announce an 11% increase in our quarterly dividend to $0.20 per share, our fifth increase since we declared our first dividend in November 2003.

    We recently signed five new store leases averaging 47,000 square feet in size and now have 87 stores under development totaling 4.5 million square feet or 48 percent of our existing square footage. These stores average 51,000 square feet in size and include 22 relocations and 14 new markets.

    Our business model is very successful and continues to benefit all of our stakeholders. We are executing at a high level, continuing to produce higher sales, comps and sales per square foot than our public competitors. We believe the investments we are making today in our new, acquired and existing stores will result in strong earnings growth in the near future.

    Given our recent merger, strong historical sales growth, significant store development pipeline, and acceleration in store openings, we believe we are well positioned to achieve our goal of $12 billion in sales in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve. We have grown our stock price at an average compound annual rate of 21 percent since going public, and we encourage our shareholders to stay focused on the long term.

    We will now take your questions but ask that you limit your questions so that everyone has an opportunity to ask questions. Thank you.

    — EVA® is a registered trademark of Stern Stewart & Co.

• July 31 - 3rd Quarter Results

• • Good afternoon. Joining me today are Walter Robb, Co-President and Chief Operating Officer, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 24, 2006. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release. Please note it includes a reconciliation to adjusted diluted earnings per share of $0.35 for the third quarter of last year which excludes $3.7 million of credits related to Hurricane Katrina.

    Our sales for the third quarter increased 13 percent to $1.5 billion. Average weekly sales for all stores increased seven percent to $647,000, translating to sales per square foot of $933.

    Our 17 new stores, including four relocations and two new markets, averaged 58,000 square feet in size and produced average weekly sales of $637,000 in the quarter translating to sales per square foot of $575.

    Our new stores open at least one year continue to run ahead of our sales projections for the first year and are on track to reach our real estate hurdle rate of cumulatively positive EVA® within seven years or less.

    Our comparable store sales grew seven percent on top of a 9.9 percent increase in the prior year. This reflects a negative impact of approximately 76 basis points from Easter shifting from the third quarter last year to the second quarter this year. Our Kensington store was a relocation of a Fresh & Wild store, so it was included in the comp base for three weeks of the 12 week quarter but was excluded from identical store sales growth. Identical store sales, which exclude four relocated stores and two major expansions, increased 5.8 percent. The variance between comps and idents increased 30 basis points in Q3 compared to Q2. Year over year, average transactions per week increased approximately four percent to 3.5 million, and our average basket size increased approximately three percent to $34.

    We believe that third quarter results, combined with our current quarter-to-date comps of 7.6 percent, are an indication that our comps have stabilized.

    We are constantly experimenting, innovating and evolving. We are opening a record number of 18 to 20 stores this year, many of which are incredibly exciting stores that will help us continue to redefine the marketplace and further differentiate our shopping experience from other food retailers. We are actively continuing to further differentiate our product offering in ways that speak to our authenticity and leadership role within natural and organic products. These initiatives include the continued expansion of our private label products which saw a 14 percent increase in SKU count year over year and currently represent 18 percent of our total grocery and Whole Body sales, our expanded "Buying Local" efforts and local product selection, our Whole Trade Program, and the recent launch of our new Five-Step Animal Welfare Rating Program which allows shoppers to easily understand how the animals from which the meat and poultry products they are buying were raised and treated.

    While the Whole Foods Market brand is synonymous with the highest quality natural and organic products, we are also known for our emphasis on perishables, beautiful stores uniquely designed for their market, and exceptional customer service, all of which translate into a fun shopping experience that is very hard to replicate.

    Now, back to our results for the quarter...

    On an adjusted basis, taking into account certain operational changes that shifted some costs from cost of goods sold to direct store expenses, our comparable stores produced a very healthy 42 basis point improvement in gross margin which was partially offset by a 23 basis point increase in direct store expenses, resulting in a store contribution improvement of 19 basis points to 10.3 percent of sales.

    Historically our second and third quarters are our strongest quarters in terms of average weekly sales and gross margin, and we typically see flat to sequentially lower gross margin in the fourth quarter compared to the third.

    Direct store expenses for comparable stores increased primarily due to increases in health care and share-based compensation expense, which were partially offset by leverage in wages as a percentage of sales. Share-based compensation expense increased $1.8 million primarily due to an adjustment for the accelerated vesting of stock options. Excluding this charge, the year-over-year increase in our comparable store direct store expense would have been about in line with what we reported in the second quarter of this year.

    For the quarter, our pre-opening and relocation costs were $15 million, or $0.06 per share, nearly double our costs in the prior year of $7.9 million, or $0.03 per share.

    For the quarter, diluted earnings per share were $0.35, in line with our adjusted prior-year results.

    In the third quarter, we opened two new stores in El Segundo and Sonoma, California and relocated one of our Fresh & Wild stores to a new Whole Foods Market location in London, ending the quarter with 196 stores and approximately 7.1 million square feet in operation. Including the new Chicago store opened last week, we have opened 14 stores this fiscal year and 18 over the last twelve months. We expect to open four to six additional stores, including two relocations, in the fourth quarter bringing us to our goal of 18 to 20 new stores for the year.

    We are extremely excited to have opened our flagship UK store in Central London. Spread across three floors within the historic Barkers building on High Street Kensington, the landmark store offers a fresh and distinctive approach to the UK grocery shopping experience with excellent customer service, food sampling and prepared foods selections mingling with thousands of fresh, organic and all natural ingredients. A few highlights include:

    • a cheese room, where shoppers can taste and select the finest cheeses from Britain and around the world with cut-to-order service,
    • an extensive wine department offering over 1,000 different labels,
    • a meat department that offers an in-house dry aging case, fresh sausage made in-house daily and meat labeled with our new Five-Step Animal Welfare Rating Program which allows shoppers to easily understand how the meats they are buying were raised and treated, and
    • a vibrant food hall on the top floor. From the sit-down experiences of the tapas bar, the champagne and oyster bar, the pub, and the sushi and dim sum eatery to the open format of the other venues, the 13 dining venues offer plenty of choices along with seating for more than 350 diners.

    The store has been warmly received and is off to a great start, setting new opening day and first week sales records for the company and ranking among our top five stores in sales volume over the last eight weeks since opening. Our real estate team is working diligently in London, and we hope to have additional sites to announce in the near future.

    Our new store pipeline continues to increase with today's announcement of seven new store leases averaging 39,000 square feet in size with expected opening dates through 2010. We now have 94 stores under development totaling just over five million square feet or 70 percent of our existing square footage. These stores average 53,000 square feet in size and include 17 relocations and 21 new markets.

    Over the last five fiscal years, our average store size has increased 20 percent, while our average weekly sales per store have increased 68 percent, and our average contribution per store increase 69 percent, both more than triple the increase in store size.

    Our current average store size is just over 36,000 square feet, while our average store size for stores in development is currently 53,000. We have continued to sign and open smaller stores, typically in markets where it is hard to find larger boxes, while experimenting with opening some very large format stores. We currently operate 14 stores over 60,000 square feet. On average, we are pleased with the results from these stores and believe they will produce very strong EVA over the long term as they will take longer to reach capacity. We plan to continue to selectively sign sites for these larger format stores, which showcase extensive prepared foods and sit-down venues, but they will predominantly be in dense urban markets or relocations of some of our very successful existing stores.

    We believe our "sweet spot" for most markets is a footprint between 45,000 and 60,000 square feet which allows us to create the exciting shopping experience we are known for while simultaneously maximizing our return on invested capital. We currently have 21 stores, including eight relocations, over 60,000 square feet in our 94-store pipeline. We are in the process of reviewing our entire pipeline and are selectively "rightsizing" the lease size or decreasing the selling square footage in the store design. We adjusted two leases and are in the process of adjusting another six leases representing an average reduction of 9,000 square feet per lease. We believe the average size of our stores in development will probably be around 50,000 to 55,000 square feet for the near future.

    Now I will turn to our thoughts for the remainder of the year.

    Please note that the fourth quarter will be thirteen weeks versus twelve weeks in the prior year. Our guidance is presented on an adjusted 12-week to 12-week basis and excludes any impact from the proposed Wild Oats merger, as it has not yet closed.

    For fiscal year 2007, we are maintaining our guidance of 13 percent to 17 percent sales growth, six percent to eight percent comparable sales growth, and 18 to 20 new store openings resulting in 16 percent ending square footage growth, and expect operating income before pre-opening and relocation costs as a percentage of sales will be in line with our 5.9 percent results year to date. We expect pre opening expense in the fourth quarter of $20 to $24 million.

    We are constantly experimenting, innovating and evolving and have a demonstrated track record of competing, executing and delivering strong results. As expected, fiscal year 2007 has been an investment year as we have accelerated our new store openings while comping against tough comparisons.

    Of our 25 stores currently tendered, 23 are scheduled to open between now and the end of fiscal year 2008, and we expect to announce additional stores over the next two quarters tendered for openings in fiscal year 2008. Therefore, we can expect this investment period will extend into next year, but to a lesser extent than we have experienced this year, as we do not expect to have the same level of year-over-year increase in our total pre opening expenses.

    Our business model is very successful and continues to benefit all of our stakeholders. We are executing at a high level, continuing to produce higher sales, comps and sales per square foot than our public competitors. Given our strong historical sales growth, record store development pipeline, and acceleration in store openings, we believe we are well positioned to achieve our goal of $12 billion in sales in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve. We have grown our stock price at an average compound annual rate of 20 percent since going public, and we encourage our shareholders to stay focused on the long term.

    Today is the first day of the U.S. District Court for the District of Columbia preliminary injunction hearing to decide whether to approve the FTC's application for an injunction to block our proposed merger with Wild Oats. The hearing is scheduled to conclude tomorrow, and we expect to receive a ruling by the middle of August.

    We are hopeful that the court will rule in our favor and that we will be allowed to move forward; however, we believe that merger or no merger, Whole Foods Market has a very bright future. We currently have 94 stores in our pipeline representing 70 percent of our existing square footage, and we believe we are on track to meet our goal of $12 billion in sales in 2010. If the merger is approved, just as we have done with our many previous acquisitions — we will improve the Wild Oats stores to make them more profitable and create an improved shopping experience for customers

    Before we take any questions, I ask that we devote this Q&A time to discussing our current results and future prospects. Thank you.

    — EVA® is a registered trademark of Stern Stewart & Co.

• May 9 - 2nd Quarter Results

• • Good afternoon. Joining me today are AC Gallo, Co-President and Chief Operating Officer, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 24, 2006. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release. Please note it includes a reconciliation to non-GAAP diluted earnings per share of $0.34 for the second quarter of last year which excludes $3.6 million of credits related to Hurricane Katrina.

    Our sales for the second quarter increased 12 percent to $1.5 billion. Average weekly sales for all stores increased six percent to $635,000, translating to sales per square foot of $932.

    Our 17 new stores, including three relocations and four new markets, averaged 54,000 square feet in size and produced average weekly sales of $588,000 in the quarter translating to sales per square foot of $565.

    We believe the best indication of our new store productivity is to look at trends over a period of time long enough to smooth out the particular mix of new stores being compared. For example, over the last five fiscal years, while our average store size has increased 20 percent, our average weekly sales per store have increased 68 percent, and we have seen our average contribution per store increase 69 percent, both more than triple the increase in store size. In addition, our new stores open at least one year continue to run ahead of our ROIC targets for the first year and are on track to reach our overall hurdle rate of cumulative positive EVA® within seven years or less.

    Our comparable store sales grew six percent on top of a 12 percent increase in the prior year. Year over year, average transactions per week increased approximately three percent to 3.4 million, and our average basket size increased approximately three percent to $34.

    Last year Easter was April 16th, which fell into our third fiscal quarter. This year Easter was April 8th, which fell into our second fiscal quarter. This Easter shift resulted in a positive impact on our second quarter comparable store sales growth of approximately 87 basis points, and we estimate will result in a negative impact on third quarter comparable store sales growth of approximately 50 to 100 basis points. We saw sequential improvement each period of the second quarter, and for the last five weeks ended May 6, which includes the Easter holiday in both years, our comparable store sales growth was 7.5 percent. We are hopeful that our current trends are an indication that our comps bottomed out in the second quarter and that the pendulum is starting to swing back the other way.

    As we previously stated, while we cannot state conclusively why our comp trends have been running below our historical eight to 10 percent average, we continue to believe it is most likely the result of many factors including the tough comparisons we face due to our three consecutive years of extraordinary double-digit comps, as well as the heightened competitive food retailing environment, a higher degree of cannibalization, and our selective price investments.

    Compared to several years ago, many food retailers are making significant capital investments in their new stores, remodels, new formats, and expanded natural and organic product offerings, and, on the margin, we believe some of these investments are having an impact on our sales.

    Regarding cannibalization, our experience has typically been that our new stores average positive comps in their first quarter in the comp base and by then the cannibalized store is back to positive comps as well, reflecting our increased market share and making it the right growth strategy over the longer term. However, as we accelerate the opening of new stores, we may see a higher number of stores being cannibalized year over year creating a larger negative impact on our comps. For example, in the second quarter, 24 of our existing stores were experiencing cannibalization, up from 14 stores in Q2 last year and up sequentially from 18 stores in the first quarter.

    We are continuing to make selective price investments which, although hard to quantify, are having some negative short-term impact on our comps as well. We believe strengthening our price image on commodity-type branded products to broaden our appeal is still the right long-term strategy, and we are fortunate that we continue to find many opportunities to lower our cost of goods sold to help offset these price investments and minimize the gross margin impact.

    We believe that competition makes us better, and we aren't standing still. We are constantly experimenting, innovating and evolving. We are opening a record number of stores this year, many of which are incredibly exciting stores that will allow us to redefine the marketplace and further differentiate our shopping experience from other food retailers. We have many global buying initiatives in place that are benefiting our customers. We are actively continuing to further differentiate our product offering in ways that speak to our authenticity and leadership role within natural and organic products. Some elements of this strategy include:

    • Private Label. In the quarter, our private label SKU count increased 16 percent year over year to over 1,900 SKUs, and our private label sales increased to 18 percent of our total grocery and Whole Body sales. We expect private label to grow to a much higher percentage of our sales over time.
      • exceptional product quality,
      • more money for producers,
      • better wages and working conditions for workers, and
      • sound environmental production practices that promote biodiversity.
      • The program will also support eliminating poverty through a donation of one percent of sales to our Whole Planet Foundation™.

      One of our first products is our EARTH University™ bananas which are high quality and are grown using low-impact earth-friendly agriculture techniques in Costa Rica. Other Whole Trade products include tea, cocoa, mangoes, rice, sugar, vanilla and coffee. Within the next ten years, our goal is to have over 50 percent of our imported products from the developing world fall under our Whole Trade Guarantee program, and, over the longer term, 100 percent.

    • Buying Local. An opportunity to differentiate our product selection while fulfilling several of our Core Values is to highlight the locally grown products in our stores, and we hope to have close to 20 percent of our produce purchases sourced locally this year. We have further empowered our individual store and regional buyers to seek out locally grown produce in addition to creating a Local Producer Loan Program through which we are offering up to $10 million in annual financial assistance. In February, South Florida beekeeper David Rukin of Buzzn Bee became the first recipient of a low interest rate, long-term loan, and we have since announced additional loans to five local producers in Colorado and New Mexico.

    We expect to make further announcements in the upcoming months about other programs that differentiate our products. In addition, while the Whole Foods Market brand is synonymous with the highest quality natural and organic products, we are also known for our emphasis on perishables, beautiful stores uniquely designed for their market, and exceptional customer service, all of which translate into a fun shopping experience that is very hard to replicate.

    Now, back to our results for the quarter...

    For the quarter, gross profit decreased 18 basis points to 35.2 percent of sales. Year to date, our gross profit at 34.7 percent of sales was in line with our five-year fiscal-year average.

    Excluding Hurricane Katrina credits in the prior year, direct store expenses for the second quarter increased 49 basis points to 25.9 percent of sales, higher than our five-year average and range. For stores in the comparable store base, direct store expenses increased eight basis points to 25.5 percent of sales due primarily to higher health care and workers' compensation costs as a percentage of sales, which were partially offset by leverage in wages.

    Year to date, our higher-than-expected direct store expenses have led to lower-than-expected store contribution and growth in operating income before pre-opening and relocation expenses.

    As we guided, our materially higher pre-opening and relocation costs resulting primarily from our acceleration in leases tendered and square footage opening this year and next year is having a significant negative impact on our diluted earnings per share growth. For the quarter, our pre-opening and relocation costs were $15.6 million, or $0.07 per share, more than double our costs in the prior year of $7.3 million, or $0.03 per share.

    For the quarter, operating cash flow was $0.47 per share. The decrease year over year was due primarily to timing differences relating to taxes paid during the quarter.

    In the second quarter, we opened a record six new stores in Fairfax, Virginia; Chicago, Illinois; Birmingham, Alabama; Manhattan, New York; Cleveland, Ohio; and Portland, Maine, ending the quarter with 194 stores and approximately 6.9 million square feet in operation.

    Our Bowery and Houston store located on Manhattan's Lower East Side is our fourth and largest New York City location at 71,000 square feet and has opened with sales above our projections. The two-story store includes three eateries; one of the nation's only genuine Fromageries featuring 80 exclusive aged cheeses; homemade pies baked fresh throughout the day; as well as foods from a variety of top-tier local artisans and growers. Innovations include mini French and Japanese-inspired bouquets in the floral department, an expanded selection of handmade sausages, and a huge selection of meats and seafood smoked in-house. Also located on the second floor is the Culinary Center, which will offer dozens of hands-on classes and demonstrations with some of the best New York and Whole Foods Market chefs, artisans and growers.

    So far in the third quarter, we have opened one store in El Segundo, California, closed one Fresh & Wild store in London that will be relocated to our new 80,000 square foot Whole Foods Market location opening in early June, and we expect to open one store in Sonoma, California. As of today, we have opened 15 new stores over the last 12 months.

    On April 24, 2007, we announced that we extended the expiration date for our tender offer to purchase outstanding shares of Wild Oats Markets, through May 22, 2007. We are working diligently with the FTC regarding their Hart-Scott-Rodino review. Although the FTC has not yet decided whether to challenge the Wild Oats transaction, members of the FTC staff have voiced concerns regarding perceived anticompetitive effects resulting from the proposed tender offer and merger. Any further updates regarding the Wild Oats transaction will be made through public filings.

    Now I will turn to our thoughts for the remainder of the year.

    Our guidance for fiscal year 2007 excludes any impact from the proposed merger, as it has not yet closed. We are maintaining our guidance of 13 percent to 17 percent sales growth, 6 percent to 8 percent comparable sales growth, and 18 to 20 new store openings resulting in 16 percent ending square footage growth, but we now expect operating income before pre-opening and relocation costs as a percentage of sales to be in line with our performance year to date.

    Our business model is very successful and continues to benefit all of our stakeholders. We are executing at a high level, continuing to produce higher sales, comps and sales per square foot than our public competitors. Given our strong historical sales growth, record store development pipeline, and acceleration in store openings, we believe we are well positioned to achieve our goal of $12 billion in sales in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve.

    Our company is constantly experimenting, innovating and evolving and has a demonstrated track record of competing, executing and delivering strong results. Based on our 19 percent sales growth last year, we were pleased to learn that we moved up 38 spots to No. 411 on the Fortune 500 list of the largest public companies in the U.S. As expected, we are going through an investment period as we accelerate our new store openings while comping against tough comparisons. We have grown our stock price at an average compound annual rate of 22 percent since going public, and we encourage our shareholders to stay focused on the long term.

    — EVA® is a registered trademark of Stern Stewart & Co.

• February 21 - 1st Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 24, 2006. The Company does not undertake any obligation to update forward-looking statements.

    The tender offer we will discuss today has not commenced. We have agreed in the merger agreement to commence a tender offer on February 27, 2007. Our description of the tender offer today is neither an offer to purchase nor a solicitation of an offer to sell shares of Wild Oats Markets. At the time the tender offer is commenced, we will file with the SEC a Tender Offer Statement on Schedule TO containing an offer to purchase and related materials. These documents will contain important information about the tender offer that should be read carefully before any decision is made with respect to the tender offer.

    We have made two announcements today. Both press releases are now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press releases. I will briefly recap our first quarter results, and then turn to our announcement of a proposed acquisition of Wild Oats.

    Our sales for the first quarter increased 12 percent to $1.9 billion. Average weekly sales for all stores increased 6% to $620,000, translating to sales per square foot of $926. We had 174 stores, or 92 percent of all stores, set new weekly sales records during the holidays.

    Our comparable store sales grew seven percent on top of a 13 percent increase in the prior year. Our year-over-year average transactions per week increased approximately 5 percent to 3.2 million and our average basket size increased approximately 2 percent to $34.43.

    Our 13 new stores, including three relocations and two new markets, averaged 53,000 square feet in size, produced average weekly sales of $571,000 in the quarter and had sales per square foot of $559.

    Due to seasonality, our gross margin is typically lower in the first quarter than for the remainder of the year, averaging 34.3 in Q1 over the past five years. For the quarter, our gross profit was inline with this average, decreasing 24 basis points year over year to 34.3 percent of sales. For stores in the comparable store base, gross profit improved two basis points to 34.5 percent of sales.

    The Whole Foods Market brand is synonymous with beautiful stores, exceptional customer service, the highest quality natural and organic products and a fun shopping experience. What we are not as well known for are the low prices that we currently offer our customers. While our core customers are not primarily focused on price, our price image is important in terms of appealing to a broader customer base, especially as select natural and organic products are becoming more available through various retail formats.

    Our strategy has been to approach pricing on a market-by-market basis, and to be competitive on the same or similar items in grocery and Whole Body. Our perishable areas such as meat, seafood, produce, prepared foods and bakery, have typically been priced at a premium, reflecting the higher quality of our offering.

    Going forward, we expect to further differentiate our product offering throughout our stores, and where differentiation is not possible, continue to selectively invest in lower prices on branded products to help enhance our value perception and broaden our appeal.

    The good news is that being a young and relatively small company, we have many opportunities to lower our cost of goods sold. We can use these savings to help offset our price investments. Therefore, we believe our historical annual gross margin range of 34 to 35 percent continues to be the best indicator of our future results.

    In the quarter, our private label SKU count increased 21 percent year over year to just over 1,900 SKUs, and our private label sales increased to 17 percent of our total grocery and Whole Body sales. We have committed additional resources to our private label team, including creating a new Global Vice President of Private Label position. We expect private label to play a key role in our product differentiation strategy and to grow to a much higher percentage of our sales over time.

    Direct store expenses increased 35 basis points to 25.8 percent of sales which is higher than our five-year average and above our five-year range. The increase was primarily due to higher share-based compensation expense and health care costs as a percentage of sales. For stores in the comparable store base, direct store expenses improved six basis points to 25.4 percent of sales.

    For the quarter, operating cash flow per share increased a very healthy 30 percent to $0.79 from $0.61 in the prior year. This takes into account approximately $10.2 million, or $0.07 per share, of share-based compensation, pre-opening rent and accelerated depreciation was expensed for accounting purposes but was non-cash, compared to $4.4 million, or $0.03 per share, in the prior year.

    In other news, we were extremely pleased to learn last month that for the tenth consecutive year we made FORTUNE's list of the "100 Best Companies to Work For." We ranked number five, our highest ranking ever, and we are one of only 18 companies to be named every year since the list's inception.

    I will now turn to our announcement of our planned merger with Wild Oats.

    Wild Oats and Whole Foods Market have both had a large and positive impact on the natural and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance and to becoming one of the fastest growing segments in food retailing today. The growth opportunity in the category has led to increased competition from many players, most of whom are not dedicated natural and organic foods supermarkets, but are considerably larger than we are.

    Our companies have similar missions and core values, and we believe the synergies gained from this combination will create long term value for our customers, vendors and shareholders as well as exciting opportunities for our new and existing team members by making us better positioned to compete in this rapidly changing food retailing environment.

    In our history, we have made 18 retail acquisitions, many of which we have considered to be platform acquisitions from which we have been able to accelerate our growth geographically. This will be the largest acquisition in our history. Wild Oats is a great geographical fit as all of our 11 operating regions will gain stores and three of our smallest regions - our Pacific Northwest, Rocky Mountain and Florida regions — will gain critical mass. We will also gain immediate access into a significant number of new markets.

    It has been our experience that most acquisitions take up to two years to transition to our decentralized operations and implement our incentive programs. We expect this acquisition to be similar and that over time we will recognize significant synergies through G&Amp;A cost reductions, greater purchasing power and increased utilization of support facilities. We are particularly excited to gain many talented team members who will provide valuable support in reaching our growth goal of $12 billion in sales in 2010.

    We will be carefully evaluating each banner as well as each store to see how it fits in to our overall brand and real estate strategy. Wild Oats has been rationalizing its store base over the last several years, but we expect we will close some additional stores as well as relocate others to stores we currently have in development. We would also expect to make significant investments in remodeling stores before eventually re-branding them as Whole Foods Market stores.

    Our company continues to evolve at a rapid pace. We have always learned from past acquisitions and look forward to building on our combined strengths, cultures and historical roots. We approached this acquisition from a strategic as well as EVA® perspective and believe we will become a much stronger and better-positioned company that will produce strong returns for our shareholders in the future.

    As stated in our press release, our tender offer is conditioned upon at least a majority, or 50.1 percent, of the outstanding Wild Oats' shares being tendered, as well as customary regulatory and other closing conditions. Wild Oats' Board of Directors has unanimously recommended that their shareholders tender shares in this offer. The Yucaipa Companies, Wild Oats' largest shareholder with approximately 18 percent ownership, has committed to tendering its shares. Approval of the transaction by our shareholders is not required. If all goes as according to plan, we hope to close this transaction in April.

    We believe we are well positioned to finance this transaction as well as fund our capital expenditures, ongoing cash dividend program and any future stock repurchases. We have committed financing of $700 million in place at closing, and we also intend to upsize our revolving credit facility to $250 million from $100 million. With $222 million in total cash and investments, only $3 million of current long-term debt, and very strong, consistent cash flow from operations, we are very comfortable taking on this additional debt and hope to maintain our investment grade credit rating.

    Our guidance for fiscal year 2007 excludes any impact from the pending merger, as the transaction has not closed.

    Our business model is very successful and continues to benefit all of our stakeholders. We are executing at a high level, continuing to produce much higher sales, comps and sales per square foot than our public competitors. Given our strong historical sales growth, record store development pipeline, continued anticipated acceleration in store openings, and this merger, we believe we are well positioned to achieve our goal of $12 billion in sales in the year 2010. Over the longer term, however, we believe the sales potential for Whole Foods Market is much greater than $12 billion as the market continues to grow and as our company continues to improve.

    We have grown our stock price at an average compound annual rate of 23 percent since going public, and we encourage our shareholders to stay focused on the long term. We are constantly evolving, innovating and maturing and have a demonstrated track record of competing, executing and delivering strong results.

    — EVA® is a registered trademark of Stern Stewart & Co.

2006

• November 2 - 4th Quarter Results

• • Good afternoon. Joining me today are Walter Robb and AC Gallo, Co-Presidents and Chief Operating Officers, Glenda Chamberlain, Executive Vice President and Chief Financial Officer, Jim Sud, Executive Vice President of Growth & Development, Lee Valkenaar, Executive Vice President of Global Support, and Cindy McCann, Vice President of Investor Relations.

    First for the legalities: The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company's SEC reports, including the reports on Form 10K for the fiscal year ended September 25, 2005. The Company does not undertake any obligation to update forward-looking statements.

    Our press release is now available on our website at www.wholefoodsmarket.com along with the scripted portion of this call and additional supplemental financial data.

    I am hoping you have all had a chance to read our press release which is very comprehensive. Please note our income statement includes our reported numbers under GAAP as well as a reconciliation to adjusted non-GAAP numbers for the quarter and the y