Whole Foods Market (WFM) is beginning to look like its old self again. The natural and organic-food retailer in its fiscal fourth quarter reported a 5.8% profit increase to $128 million after a slew of letdowns over the past 12-month period, sending shares 10% higher in response.

Not bad for one day, and the good news couldn’t have come soon enough for battered WFM investors, who saw the stock lose 30% of its value this year before today’s jump.

The grocery retailer has been attempting to hold its own in a market segment for which it helped to create demand but that has since attracted a bunch of lower-priced rivals, forcing Whole Foods Market to become more competitive on the pricing front and lower its guidance four times in as many quarters.

Now the company seems to be resonating with customers again, evidenced by the 4.6% jump in comparable-store sales for the current quarter to date. However, while performance was a step in the right direction, Whole Foods stock isn’t out of the woods yet.

The Results

Whole Foods reported fiscal fourth quarter EPS of 35 cents per share versus 33 cents in the year-ago period. Q4 revenue of about $3.3 billion represented a 9.4% increase over last year, while fiscal year total sales of $14.2 billion rose 10% year over year, which was a hair better than the company’s most recently revised guidance.

While comparable-store sales advanced 3.1%, the grocery chain’s 15-year historic average through fiscal 2013 is a more robust 8.2%, demonstrating the success that lower-priced rivals including the likes of Kroger (KR) and Walmart (WMT) have had in taking organic food market share. Meanwhile, investors have flocked to the likes of KR, whose shares are up about 35% in the past year and whose stock performance resembles that of Whole Foods in its prime.

The shifting competitive landscape has forced the hand of Whole Foods to begin lowering prices even as gross margin was already pressured by 20 basis points to 35.4% in Q4 with expectations for more of the same in fiscal 2015. Meanwhile, general and administrative expenses have been holding steady between 3%-3.2%, but Whole Foods has got the likes of Sprouts Farmers Market (SFM) and Kroger in its rear-view mirror with profit margins of 30.1% and 20.5%, respectively, and threatening to rise.

WFM will continue discounting, particularly in its perishable food segment, which comprises more than two-thirds of its overall sales. Whole Foods is in the midst of what it characterized on its earnings call as a “pricing experiment” in select markets involving “broaden[ing] our selection of products at entry-level price points, increas[ing] promotions and narrow[ing] price gaps on select known value items.” If successful, the initiative could be expanded upon throughout the year. The cost will be a fiscal 2015 gross margin decline that’s worse than the most recent showing.

While competition has forced Whole Foods to rethink its strategy, the higher-end grocer is making some moves of its own. In recent months it launched a loyalty program dubbed Whole Foods Market Rewards in test markets that, if it continues to drive “higher baskets,” could be expanded to more of its 400-plus locations next year. It’s also touting itself as the first national grocer to accept Apple Pay as a form of mobile payment from its customers, technology that other retailers including CVS Health (CVS) have shunned.

Shareholder Value

While Whole Foods stock has taken a beating, investors over the past year haven’t been left entirely high and dry. Whole Foods in Q4 paid out $44 million in dividends and repurchased $100 million in stock. The company just lifted its dividend by a penny to 13 cents per share, but it declined to discuss its share-buyback plans on the earnings call. It’s little solace to investors who have seen their gains erased, but things do appear to be looking up, particularly as it grows its store footprint by about threefold across the U.S. for the long term.

Despite Whole Foods stock zipping past $40 per share — a level it hasn’t seen since June — the stock still hasn’t recaptured all of its losses from the spring. Plus it’s trading about 25% below its 52-week high of nearly $60 per share. If sales continue on their upward trajectory, lower profit margins for the near term notwithstanding, and the grocer manages to deliver on its promises, Whole Foods stock could have more room to run.

And while the company has outlined its expectations for fiscal 2015, including sales growth of about 9%-plus and a comparable-store sales increase in the low- to mid-single digits, don’t expect quarterly updates on this outlook. After lowering its guidance four times in fiscal 2014, Whole Foods has decided to nix quarterly target updates.

Conclusion

Whole Foods stock is trading beyond the analyst median target of $41 per share, according to Yahoo Finance. However, with the first quarter of fiscal 2015 off to a solid start, evidenced by the positive trend in comp-store sales and basket sizes, there could be some more upside for the remainder of the year.

Don’t fill your cart with Whole Foods stock, but buying some WFM at these levels could provide you with some holiday cheer in the next couple of months.

As of this writing, Gerelyn Terzo did not hold a position in any of the aforementioned securities.