Good day, everyone, and welcome to the Whole Foods Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, there will be an opportunity to ask questions during a Q&A session. At this time, it is my pleasure to turn the conference over to Cindy McCann, Vice President of Investor Relations.

Good afternoon, and thank you for joining us. On today's call are John Mackey and Walter Robb, Co-Chief Executive Officers; A.C. Gallo, President; Glenda Flanagan, Executive Vice President and Chief Financial Officer; Jim Sud, Executive Vice President of Growth and Development; David Lannon and Ken Meyer, Executive Vice Presidents of Operations; and Jason Buechel, Executive Vice President and Chief Information Officer. As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in our company's most recently filed Form 10-K. Please note our press release and scripted remarks are available on our website. For easier comparisons, we will discuss our results excluding the asset impairment and restructuring charges. I will now turn the call over to John Mackey. John Mackey - Co-Chief Executive Officer & Director: Thank you, Cindy. Good afternoon, everyone. I will briefly review the quarter, focusing most of my time today on the steps we're taking to communicate our differentiation, improve our value perception and fundamentally evolve of our business. In Q4, our sales increased 6% to a record $3.4 billion. We opened 10 stores, expanding our reach to 431 stores across 42 states and three countries. After appearing to stabilize early in the quarter, our comps moderated over the last nine weeks driven by changes in both traffic and basket size. Our EPS miss was driven in large part by weaker-than-anticipated sales; however, we still delivered a strong EBITDA margin of 8% and healthy cash flow from operations of $132 million in our seasonally slowest sales quarter of the year. In the face of increasing competition, we are not standing still. As highlighted in…

Thank you. We'll go first to Rupesh Parikh with Oppenheimer. Please go ahead. Rupesh D. Parikh - Oppenheimer & Co., Inc. (Broker): Thanks for taking my question. So my one question has to do with share buybacks. I just wanted to understand the rationale for taking on debt and buying back shares right now maybe instead of waiting until maybe comp trends stabilized. So if you could maybe help us with your thought process. John Mackey - Co-Chief Executive Officer & Director: We think Whole Foods is a compelling buy at these prices. Stock buybacks are going to be accretive in the short-term and the long-term. And it doesn't preclude us from making further stock buybacks in the future if necessary. Glenda Jane Flanagan - Chief Financial Officer & Executive Vice President: It's sort of a perfect situation, Rupesh, this is Glenda, with interest rates being what they are and the long-term debt market being what it is and our trading metrics – stock price trading metrics, relative to history being what they are. And we have very strong cash flow and are very confident in our ability to service the debt and to continue to fund our growth out of our own cash flow. John Mackey - Co-Chief Executive Officer & Director: And also that we structured the debt in this way, the debt buyback in this way, where we have the flexibility over time to use it as we want to use it, when we want to use it. Rupesh D. Parikh - Oppenheimer & Co., Inc. (Broker): Okay. Great. I'm going to ask one more question quickly. You laid out a number of sales initiatives in your prepared comments. So if you look out the next couple of quarters, what are the key sales initiatives you believe can help to drive traction? Especially on your top line as the fiscal year progresses? John Mackey - Co-Chief Executive Officer & Director: If we had a magic bullet we've already shot it. We don't think there's anything we can do immediately except increase promotional activity to drive sales. We think it's basic blocking and tackling. We're going to get back to basics at Whole Foods. We're going to upgrade our customer experience. We're re-examining our business, and we're systematically working, basically, to cut costs that aren't going to create value for our customers. And then we can invest a lot of that in promotions and into strategic lower prices. So part of it'll be pricing, part of it is going to be marketing. We're going to support our strategic price investments and promotions with marketing around the country, so we're upping our marketing spend this year. And, you want to add some more color to that, Dave?

Yeah. Operations, I would say, this is David. So we're really eyes on the price, focusing on execution. So looking at our in-stock position. We have a new out-of-stock tool that we've implemented across all stores to make sure that when our customers are in a store they can always buy the products that they want. This has been very helpful with our friends at Instacart to increase our now record sales through Instacart. So things like that. Operations with the new labor scheduling tool which we're expanding beyond customer service into our grocery department and our whole body departments. So just-in-time scheduling to make sure we're really taking care of our customers and eyes on the prize, focusing on results, focusing on operations.

Yeah. One other point that I want to make – this is Ken – is bringing on the GDP of culinary and hospitality and recognizing that prepared foods and bakery are significant differentiation points for us, having leadership around that where we set really strong guidelines around culinary expectations, reset the expectation on hospitality in our stores, really develop partnerships with restaurateurs that are going to create differentiation for us. We really feel like that's going to be an incredible sales driver for us and a differentiation point for us over the next year. Rupesh D. Parikh - Oppenheimer & Co., Inc. (Broker): Thank you, and good luck with your efforts.

Thank you. John Mackey - Co-Chief Executive Officer & Director: Thank you. Glenda Jane Flanagan - Chief Financial Officer & Executive Vice President: Thank you, Rupesh.

Thank you. We'll go next to Meredith Adler with Barclays. Please go ahead.

Yeah, thanks very much for taking my question. I would like to talk a little bit about the changes you're making in the cost structure, especially you talked about procurement, but other areas. You've had a very successful model of being regionalized. And I'm just wondering, how do you maintain the creativity, the great shopping experience, the localization, if you centralize certain things to take cost out? John Mackey - Co-Chief Executive Officer & Director: Meredith, that such a good question. And there's very few questions that Whole Foods Market is thinking about deeper than that and continuing to dialogue about it because we know we need to evolve our business model. And we know in many cases such as purchasing we want to take advantage of our scale. We have a redundancy built into the system. So the art of what we're trying to do is we want to evolve the structure in such a way that we take out redundancy and waste, and at the same time though, we're not diminishing the culture, the empowerment efforts that make Whole Foods Market special. And that just means we have to proceed very thoughtfully, very carefully, and we have to be very inclusive in making the decisions so the voices are heard. That means Whole Foods does move, sometimes it can move a little bit slowly, but it means often times we'll make better decisions because of the inclusive nature of it. But it was a good question because we are thinking deeply about it. And I think the fact that we're so conscious of it means that we're less likely to just do something inadvertently to screw it up. But we are determined to evolve. So we are going to evolve, but we're going to take our culture with…

David, just a couple of examples to think about. Its also we have the ability to eliminate some positions because we no longer need it based on technological things we've put in our stores. For example, the new labor scheduling tool, in the big stores, one of our big New York City stores, you might have somebody working 40 hours a week on the labor schedule just for the customer service team, just the cashiers. Now we have – our new system actually predicts the scheduling so we probably can reduce that to 20 hours instead of 40 hours. So that's just cost we can take out of the system without radically changing our culture at all. John Mackey - Co-Chief Executive Officer & Director: And one more thing I'd like to add specifically to purchasing. I do believe that there's been great strength in the decentralization that we've had in our purchasing teams, especially in the perishable areas. And at this point, we see pretty much for the perishables, for produce, meat and seafood, they will be still largely directed by the regional teams with the global teams helping them on that. So the real exciting stuff in the store is pretty much still going to be mostly run by the regional teams. It's really in the center store where we're looking at doing a lot more – bringing a lot more responsibility for center store products to the global team. Why that makes sense is that we work with our very large center store suppliers and we feel like we can most efficiently work with them and have the best partnership with them at the global level, but there'll still be a strong regional component. We're still going to have the regional folks very involved in those decisions but we think that we can, by improving our overall functionality in that area, we think that we can come to a lot better decisions that really work across the company.

All right, thank you. That's very helpful.

Thank you. We'll go next to Vincent Sinisi with Morgan Stanley. Please go ahead. Vincent J. Sinisi - Morgan Stanley & Co. LLC: Hey. Great. Good afternoon. Thanks very much for taking my question, guys. Maybe turning to the other margin, the gross margin, just wanted to get a little bit more sense here. I know you said that you're expecting gross margins to be down a bit further next year as compared to this year. In the past – and I know that's, of course, primarily on value efforts – but in the past you've said that basically some things you've done have given the lift that's wanted and other things that you felt you probably didn't need to do. So could you just give us maybe a little bit more sense for whether it's by category, product, et cetera, kind of your learnings so far in several quarters now that these value efforts have been more of a focus. What's working the best, what you need to do some more work on, and the thoughts going into next year specifically? A.C. Gallo - President & Chief Operating Officer: Hi, A.C. Good question. What we have found when we've looked at – we've been doing some margin investments every year for the last three years. We ramped it up a little bit in 2015 and plan on doing even more in 2016. Where we've seen the best results is in – whatever category it's in has been through promotions. We've done experiments with lowering everyday prices and trying to set certain categories at certain places but we found, for the most part, that our customers react best to promotional activity and so that's where we really look to focus ourselves going forward. This past year we did pick certain markets and we did a lot more produce promotions and we were happy with what we saw there so we'd love to do more this year again, and also across other teams as well. Vincent J. Sinisi - Morgan Stanley & Co. LLC: Okay. Thanks very much, A.C.

Thank you. We'll move next to Bill Kirk with RBC Capital Markets. Please go ahead.

Hi. I guess over two years ago you talked about a common POS system and said it would take 18 months to 24 months. And then I think you also said that loyalty card would be widely available for this holiday season. What caused those initiatives to fall behind by so much and does your current guidance for initiatives have, I guess, more conservatism around the timing? Jason J. Buechel - Chief Information Officer & Executive VP: Hi. This is Jason. When we gave the initial guidance we talked about what it would take to get into our initial stores. We're currently in 18 stores with our one point of sale program. We went to that first store at the beginning of this year and so we think we've got a pretty conservative timeline that we've put in our guidance for today. As it relates to the affinity program, as mentioned, we really are very positive on the results that we've seen so far with the program. Our opportunity here is to make sure that we've got one that has got the right cost structure in place for us and has the right win-win and value propositions for the customer. We're continuing to evolve a few more different tests and we are very optimistic on being able to bring this to all of our customers before the beginning of next calendar year as we mentioned.

Thank you. That's my one question.

Thank you. We'll go next to David Magee with SunTrust Robinson Humphrey. Please go ahead.

Hello. What percent of the stores square footage would you say right now is at an appropriate pricing level? And then as a second part to that, didn't you all have a marketing campaign you kicked off last year at this time and I'm curious if that was pulled back during the course of the fiscal year? Thank you. John Mackey - Co-Chief Executive Officer & Director: We don't really know how to answer that first question. What percentage of our stores is at the right pricing level? Does anybody else? I can't answer it. Walter Robb - Co-Chief Executive Officer & Director: I think we look at it more broadly at our overall competitive position and as A.C. mentioned earlier, obviously laying out tracks to invest strategically and systematically this year through both promos and lower prices, but I think for competitive reasons we would leave it more general than that. A.C. Gallo - President & Chief Operating Officer: But also the hard – the reason that's quite a hard question is that it's really different in different markets and different competitors. You look at some markets we may feel we're completely appropriately priced in produce and in another one we need to invest more, in another one might be fine in center stores and another one – so it really varies a lot by region but the thing is that what you do is you really look and see how your customers are reacting to the particular marketplace and then you look and see what dynamics are in that marketplace and then decide how you invest there. So it's really a varied process that goes on so I think for all retailers in that type of condition.

It's David, the other thing I would say from operation as well as purchasing is it's a two-pronged thing. We focus on being competitive on prices but we also focus on differentiation and press for advantage. So we have a fully differentiated product line like our meat standards, our prepared foods where we have scratched production unlike any of our other competitors. We can press that advantage. So we're trying to expand the amount of items that are not – we don't have to be as price competitive on because they are fully differentiated. We're looking on all other product lines right now to see what products we can add to be fully differentiated. John Mackey - Co-Chief Executive Officer & Director: Having said, we significantly improved our price tracking tools, our competitive tracking tools. We've expanded the amount of items in there. This team has worked to upgrade all that reporting that gives us every two weeks snapshot and exactly where we stand relative to the various competitors in the various markets as A.C. said. We've got better tools than we've ever had to see exactly where we stand and where price relevancy where we need to move on price relevancy. And I also want to underscore David's point about the strategy here is around being a quality grocer. We are the highest-quality grocer in the United States and that's who we are, that's what we stand on and we're going to combine that with price relevancy but we're going to stand on the fact that we sell the best stuff.

And on the marketing campaign? Is the next one going to be a lot different than what you did last year at this time? John Mackey - Co-Chief Executive Officer & Director: Well, I think the thinking was on the campaign is the timing was off to do it. Right now we had other things to take care of and to put in order and as we think through – we've already thought through what we think that next message will be but obviously, no, it won't be the same message. It will be building on that with a new set of messages that continue to work off of our core and our standards and our transparency and our quality but around why those really matter to the customer and our unique place in that. So we'll also have the new digital platforms available too, as well to carry those messages, not just TV but workers as I think somebody mentioned earlier we'll be launching our digital flyer next year that will be nationwide.

Great. Thank you.

Thank you. We'll go next to Mark Wiltamuth with Jefferies. Please go ahead.

Hi. I wanted to dig in a little bit on the e-commerce front and by the way thank you for quoting from our e-commerce report at the front of your comments. I wanted to find out how deep you are on Instacart right now. What percentage of your sales is derived from e-commerce right now? And how many of the stores are really covered by Instacart at this point? Jason J. Buechel - Chief Information Officer & Executive VP: This is Jason. We don't actually disclose our percentage of sales at this point. We do have an all-time record high. We've just hit the $2.5 million mark which is the average sales of our last four weeks. We also have over 50 of our stores right now that are part of our we call it embedded shopper program that provides in a delivery radius. John Mackey - Co-Chief Executive Officer & Director: David, also I would say anecdotally we've had stores up to 15% of store sales are closing in on $100 basket size for Instacart. So those are individual stores, but it shows a path to where we can get to.

Okay. And how do you stand on getting prepared foods rolled out? John Mackey - Co-Chief Executive Officer & Director: So we've been doing a number of tests in that particular space. As you know, the time frames which people want those delivered are in a very immediate timeframe. So it's something that we've been testing out in our SoMa store in San Francisco and look to scale various elements as we find success there.

Okay. Thank you.

Thank you. We'll go next to Ken Goldman with JP Morgan. Please go ahead.

Hi. Thanks. John, I think you said you wanted Whole Foods to get back to basics. You talked about a lot of new and interesting initiatives today, so I wanted to figure out the balance on that. What have you been doing that's not basics, so to speak? I don't know if that means it's been a distraction or what. And are there efforts you'll pull back on as you build out others? Just trying to get a sense of what may go away as you start new things? John Mackey - Co-Chief Executive Officer & Director: That's a good question, Ken. So by basics what I meant on blocking and tackling, I mean retail ultimately always comes down to how satisfied the customer is. So it's about retail is detail is the cliché, and it's a very appropriate one. Things like the level of customer service, the level of in-stocks that we have in our products, how the stores look, the overall feeling they have when they're in the stores, the cleanliness of the stores. Everything has to do with upgrading the customer experience, from signage to the way we communicate. The message is how the prepared foods taste. It's making sure that we're executing operationally at a very high standard. So that's what I mean by getting back to basics. That doesn't conflict with our need to evolve and to introduce all these new initiatives to evolve our business model. I think those are complementary to each other, but they have to be on the foundation of very strong operations. It's ultimately satisfied customers who are your best form of advertising that you have. They're the ones that tell their friends, and a loyal customer comes back every week and their basket size is going up. I'm not going to say Whole Foods neglected that. I don't think we've neglected it, but I think we need to up our game. We're going to get better at it.

Working with our regional presidents who are doing a spectacular job on some of these cost reductions, they're really focusing on anything that takes the store team leaders out of the store. So we're – a big frugality push on travel and focusing on getting our store team leaders to eliminating days they're not in the stores. And at the store level, getting those store team leaders to focus on getting their leadership and their team members on the sales floor, out of back room focus and really focusing on taking care of the customers, in-store shop conditions, and just eyes on the prize. Anything that's extra credit or a distraction, we are refocusing that back on taking care of our customers. Walter Robb - Co-Chief Executive Officer & Director: This is Walter, and I'll just add to your question, Ken. Kind of book-ending on John's comments, is that if you're to look at the focus on the basic, but you support that by fundamentally relooking at the way you do work. So that is the structure of jobs, it is the processes we use, the redundancies that might exist. And you say to yourself, how can we do this work? How can we make this work simpler so that the worker really focusing on the customers and each other can continue to happen in a more efficient and productive way. And I think that's the effort of the overall looking at the business. And I think the second thing is using technology, because clearly these investments, these three platform decisions we've made, whether it's Workday on the TMS or HR side, the One POS on the front end side, and then also the Infor on the supply and merchandising side, all three of those things are going to make work a lot easier to do with more transparency. They're going to be ultimately supportive of having the team members to be able to focus on the customer experience and the work happen more efficiently. So it's combining the future ideas with the core, as John said. And third, I think we all know now that the door to the store is not just at the physical, it's also a digital door. And we've got work to do to take that same in-store experience that we have created so well over the years and take that and extend it onto the digital platforms where our customers come. We have 6 million visitors a month to our website. That's a pretty high number for a supermarket. And relative to our – so we have opportunities to convert those and continue to build trips through that, so essentially extending experience and having a digital door to Whole Foods as well as a physical store.

Thanks so much.

Thank you. We'll go next to Edward Kelly with Credit Suisse. Please go ahead. Edward J. Kelly - Credit Suisse Securities (USA) LLC (Broker): Hi. Good afternoon, guys. And thanks for taking my question. I'd like to just get back to a comment that you made earlier about not participating in a race to the bottom on price. And I guess if you look at the industry, somebody like Kroger has proven over time with Walmart that you don't need to be in-line with competition from a pricing standpoint to reach an equilibrium in total value. I'm sure that applies to your model as well, but the real question here is just, how are you thinking about the appropriate level of gross margin in this business now longer-term? You used to talk about, I think it was 34%, 35%. Where do we stand on that? Just thoughts there would be helpful, I think. John Mackey - Co-Chief Executive Officer & Director: A good question. That's another good question because that's something we're continually talking about and strategizing about and evolving our position on it. But, first thing I would say is that a lot of the folks that are copying Whole Foods at this point, they are not copying our quality standards, they are copying our look and feel and our marketing. And so far, that's a good strategy; it's working. Many customers are not looking beneath the hood; they're not seeing the differences. So one of the challenges Whole Foods has to do a better job at is communicating our superior quality. The differentiation, it's there. It's definitely there in the perishables, from our animal welfare system in meat to our sustainable seafood to our responsibly-grown produce. So we have to do a better job of connecting to our…

Thank you. We'll take our final question from Chuck Grom with Sterne, Agee CRT. Please go ahead.

Hi, guys. This is actually Renato Basanta on the line for Chuck. Thanks for taking my question. So I just wanted to flesh out the price investments here a little bit. Can you just give us some specifics in terms of what percentage of markets or stores you currently have the permitter (44:27) price investments in. What you're planning going forward in terms of additional rollouts, maybe what kind of elasticity you've been seeing in terms of these investments? And then finally just your thoughts on how deep or broad-based the investments may need to be to get the desired effect on the volume front. A.C. Gallo - President & Chief Operating Officer: Hi. A.C. here. We've made – I would say price investments, we've made across all of our stores. We did focus, as we said, we did focus certain produce price investments this past year in certain markets, four markets in particular then we added a fifth one later in the year. And we are happy with the results in that and are looking to maintain and expand that this year in produce. And we're also looking to do increased promotions throughout a lot of other parts of the company and specifically where we do them and really depends on as I was saying earlier, every market is different and so we'll focus produce promotions more in some markets. We'll do more meat and seafood in other markets and grocery in other ones. It's really a very thought through careful strategy that you do, that we'll do in each market depending on the needs that we have there.

This is David. I guess one more thing I would just say is that one thing we have been learning over the last few months is that the more promos that we do together where promos that affect the whole company from our recent customer focus Love Fest promotion that amplified the effect because we can put out through all the digital channels the connection on price so that price is marketed across the entire company. So we're looking at more and more ways that we can amplify by doing promotions together. Walter Robb - Co-Chief Executive Officer & Director: I guess to close that off and just, again, reiterate what John said at the end when we opened up around, this team is really committed to rebuilding the sales momentum. Traffic and sales through these actions that we kind of laid out today and the combination of not only the price investments and the promotions that A.C. have talked about but also the strong communication of our differences and our quality which is what sets Whole Foods Market apart which is ultimately a winning strategy I think for a company. So but make no mistake this team recognizes we're not where we want to be right now with respect to sales. We intend to move on that and hopefully you have some more confidence from this conversation today at exactly the steps that we're going to take. John Mackey - Co-Chief Executive Officer & Director: Okay. I want to thank everybody for listening in today. Please visit Whole Foods Market in-store and online for the best selection of fresh healthy holiday meals and join us in February for our first quarter earnings call. We look forward to updating you on our progress on our Q1 earnings call next February. A transcript, a descriptive portion of this call along with a recording of the call is available on our website as well. Thanks for listening in. Talk to you next quarter. Bye.

This does conclude today's conference. We appreciate your participation. You may disconnect at any time, and have a great day.