Shares of Whole Foods plunged as much as 9 percent after the company released fiscal fourth-quarter earnings Wednesday.
Whole Foods also announced a $1 billion stock buyback program, dividend increase and capital structure plan.
The grocery chain posted quarterly revenue of $3.44 billion, missing analysts' expectations for $3.47 billion, according to Thomson Reuters. Whole Foods reported GAAP earnings per share of 16 cents. Adjusted for one-time items, the retail chain reported earnings per share of 30 cents, missing the 34-cent mark analysts had been expecting.
The shares later recovered slightly to a drop of 6 percent in extended trading.
Comparable-store sales — a key metric for the company — decreased 0.2 percent during the quarter. Analysts had expected growth of 0.7 percent, according to consensus estimates from Consensus Metrix.
The company attributed the big miss to competition among its own stores and mainstream retailers as well as negative publicity surrounding a New York City .
Whole Foods, which is battling to lower prices while maintaining its position as a high-quality retailer, has become one of the biggest turnaround stories in the U.S. food sector.
"In this dynamic and increasingly competitive marketplace, we recognize we need to move faster and go deeper in creating a solid foundation for our long-term profitable growth," Co-CEO Walter Robb said on the earnings conference call.
"Promotions and price investments are an integral part of our conversation, but we are not participating in a race to the bottom."
Robb also told investors that comps could "get marginally worse before they get better [in fiscal 2016], with an inflection point later in the year." Restructuring costs could also lead to a decline in operating margin of up to 75 basis points from the 6.1 percent Whole Foods reported a year ago.
The deceleration in same-store sales has troubled investors in Whole Foods, which is fighting to keep a grip on the natural and organic grocery category it pioneered and long dominated.
"They've been pushing the buyback lever for a while here," Leigh Drogen, CEO of open financial estimates platform Estimize, told CNBC. "The problem here is not anything that Whole Foods actually has an ability to change, it's just the total addressable market issue. They've saturated the market with what this product is, and there's really nothing for them to do at this point."
The $1 billion buyback would bring the company's total share repurchase program to $1.3 billion. Whole Foods also declared a 4 percent increase in the quarterly dividend, payable in January.
Last month, the company announced a minority stake in the upscale sandwich chain Mendocino Farms. It did not disclose the size of the investment.
The news came about a month after Whole Foods said it would cut its staff by 1.6 percent as it works to lower prices and better compete in the food retail industry.
The specialty food company's shares have declined nearly 40 percent this year amid growing competition from mainstream retailers who have increased their natural and organic food offerings.
In comparison, the S&P 500 food and staples retailing industry group, which includes shares of Whole Foods, Wal-Mart and Costco Wholesale as well as other retailers, has declined just 6 percent on the year.
— CNBC's Karma Allen and Reuters contributed to this report.