Whole Foods has lacked luster over the recent months and same-store sales only helps bring that into focus. This quarter comp-stores and identical-store sales for WFMI stores only were almost as bad as its Wild Oats? stores. According to Fil Zucchi, "If you eliminate goodwill and mark down other assets to the value which could actually be realized for them (as opposed to the value carried on the books) a rough guest-imate is that WFMI has $650 million of assets against $1.7 billion of liabilities. This is for a company whose net income this quarter missed some of the most bearish sell side estimates by a mile."

For the fiscal year ending September ?09, WFMI will likely show sales of $9.5 billion and will be lucky to make $1.60/share. By then its debt load will probably be well in excess of $2.0 billion. Compare that to Safeway (SWY), with current trailing 12-month sales of $43 billion and total debt of $6.1 billion. SWY trades at a forward P/E of 13.5, WFMI is at 27.6. Since 2Q of 2006, WFMI has generated an average negative free cash flow of $38 million per quarter.

WFMI is a marginal growth story with a growing pile of debt. In a market where many fear recession and we see the biggest jump in food prices in 18 years, it is no wonder why they can't sustain their earlier growth. CEO Mackey is going to have to find a way to "fix" their business model.