Whole Foods Market 2005 Compensation Committee Report

The Company’s Compensation Committee is empowered to review and approve on behalf of the full Board of Directors the annual compensation and compensation procedures for the five executive officers of the Company: the Chairman & Chief Executive Officer, the Executive Vice President & Chief Financial Officer, the Executive Vice President of Growth and Business Development, and the Co-Presidents & Chief Operating Officers. The Committee also administers the Company’s stock option plans and Team Member stock purchase plan.

Annual executive officer compensation consists of a base salary component and an incentive component. The Company’s publicly stated policy is to limit cash compensation paid to any officer in any calendar year to fourteen times the average salary of all full-time Team Members. Amounts earned in excess of the salary limitation may be deferred to future years. However, 2004 is the last year in which such deferral is permitted by our policy. All compensation decisions are subject to the implementation of this policy. In addition, the Committee considers numerous factors including the Company’s financial performance, the individual contribution of each executive officer, compensation practices of comparable companies and general economic factors. Stock price performance has not been an important consideration in determining annual compensation because the price of the Company’s common stock is subject to a variety of factors outside the Company’s control.

The base salary levels for the executive officers of the Company were increased 5% in calendar 2004 over calendar 2003. The most significant determinants in the increases were the growth and financial performance achieved by the Company.

All of the Company’s executive officers participate in an incentive compensation plan based primarily on improvement in EVA (Economic Value Added). EVA is a management decision-making tool and incentive compensation system that the Company adopted and began to implement in 1999. The incentive compensation paid to the executive officers for fiscal 2004 was based upon the incremental improvement in the Company’s overall EVA and the number of new stores opened within the development budget during the fiscal year. The incentive compensation paid to the Co-President and Chief Operating Officers for fiscal 2004 was also based on the incremental improvement in EVA achieved by the specific geographic regions of the Company that correspond to the executive’s area of responsibility and the number of new stores opened within the development budget during the fiscal year in those specific geographic regions. Fiscal year 2004 incentive compensation averaged approximately 29% of the total cash compensation earned by the executive officers.

The Company’s executive officers have also received option grants under the Company’s stock option plan. The Committee believes that the grant of options enables the Company to more closely align the economic interest of the executive officers to those of the shareholders. The level of stock option grants to executive officers is based primarily upon their relative positions and responsibilities within the Company. Grants are made on a discretionary rather than formula basis by the Committee.

For calendar 2004, the Committee approved a 5% increase in the base salary of Mr. Mackey, Chairman and Chief Executive Officer of the Company, from $326,000 to $342,000. The increase was intended to recognize Mr. Mackey’s contribution toward the significant growth of the Company and the financial performance of the Company in fiscal 2003. The Committee was also cognizant of the significantly higher level of base salaries paid to chief executive officers of comparable sized companies. During fiscal 2004, Mr. Mackey was awarded options to purchase 13,750 shares of common stock under the Company’s incentive stock option plan.

Committee Compensation
Avram Goldberg (Chair)
Dr. John B. Elstrott
Morris J. Siegel
Dr. Ralph Z. Sorenson