Image: Whole Foods Market.

The way Americans eat has changed dramatically in recent years, and Whole Foods Market (NASDAQ:WFM) has played a key role in raising awareness of natural and organic alternatives to traditionally grown food products. Yet more recently, Whole Foods has seen its growth slow, and from an investing standpoint, Whole Foods stock has performed abominably during the past year as its turnaround efforts haven't yet paid off.

Coming into Wednesday's fiscal fourth-quarter financial report, Whole Foods investors were impatient to see if the grocery chain could finally get things moving in the right direction. The grocery chain's results left a lot to be desired, and shareholders weren't even satisfied with efforts to change the company's capital structure and implement a huge stock buyback. Let's look more closely at what Whole Foods did, and why it was so unappetizing to investors.

Whole Foods can't cook up a good quarter
Whole Foods' fiscal fourth-quarter numbers put an ugly finish on what has been a challenging year. Sales rose 6%, to $3.44 billion, falling just short of what investors had expected to see from the company. Yet net income got cut by more than half, to just $56 million. Even after adding back impairment and restructuring charges, adjusted earnings of $0.30 per share were still $0.05 worse than the consensus forecast among investors.

Looking more closely at the numbers, comparable-store sales came in worse than ever, actually falling 0.2% on a constant-currency basis, and continuing a weakening trend that has gone on for a long time. Falling traffic outweighed a small rise in basket size. Moreover, the poor trend continued into the current quarter, with Whole Foods reporting a steeper 2.1% drop in comps through Nov. 1. The grocery chain also kept seeing its gross margins decline, falling nearly a full percentage point, to 34.5%.

Still, Whole Foods tried to accentuate its accomplishments. The chain opened a record 38 new stores during the past year, with 10 new stores coming on line in the fourth quarter alone. It also signed seven new leases for four new Whole Foods stores, and three new 365 locations reflecting stores opening through 2019. It has signed more than 110 leases on stores for both concepts scheduled to open through the 2021 fiscal year.

Co-CEO John Mackey defended the company's pace of its turnaround. "In the face of increasing competition, we are not standing still," Mackey said. "We have made measurable progress on many of our strategic initiatives over the past year while producing industry-leading sales per gross square foot of $970, a record $1.1 billion in cash flow from operations, and healthy returns on invested capital."

Big moves from Whole Foods
Along with its quarterly results, Whole Foods also announced a new capital-allocation strategy. The company will add another $1 billion to its stock-buyback program, as well as boosting its dividend by 4%. To finance the buyback, Whole Foods said it had opened a $500 million credit facility, and would issue new debt of up to $1 billion in the near future. The company believes that the move will give Whole Foods flexibility to reduce cost of capital by taking advantage of low interest rates while they last while accumulating capital for growth.

Nevertheless, Whole Foods investors can't be happy about the sluggish guidance the grocery chain gave for the 2016 fiscal year. Whole Foods now expects sales growth of just 3% to 5% next year, well below the 7.5% consensus forecast among investors. The grocery chain said that it hopes that comps will stabilize; but even in the best-case scenario, it still expects a 2% drop in the fiscal first quarter climbing to a 3% rise by the fourth quarter of fiscal 2016.

Moreover, investors seem to be losing confidence in the natural and organic foods space more broadly, as conventional grocers recapture some of their lost business. Both The Fresh Market (NASDAQ:TFM) and Sprouts Farmers Market (NASDAQ:SFM) have seen shares fall sharply so far in 2015, and even the prospect of a potential buyout for The Fresh Market hasn't been enough to make the shares climb very far in response. Both Sprouts Farmers Market and The Fresh Market have seen growth deteriorate recently, with The Fresh Market seeing a 1% drop in comparable-store sales, while Sprouts saw comps growth slow to just over 5% in their most recently released results.

Shareholders initially sent Whole Foods' stock down nearly 10% in after-hours trading, but within the first half-hour of the post-market session, the stock cut its losses somewhat. Nevertheless, those expecting Whole Foods to make noticeable progress on its turnaround plans have had to deal with disappointment yet again, and it will take patience to see whether Whole Foods can succeed in making an eventual recovery.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Dan Caplinger owns shares of Whole Foods Market. The Motley Fool owns shares of and recommends Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.