<PAGE>
 
                                 UNITED STATES
                                        
                       SECURITIES AND EXCHANGE COMMISSION
                                        
                            Washington, D.C.  20549

                                  FORM 10-K/A
                                        

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

                         Commission file number 0-21577
                                        

                            WILD OATS MARKETS, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                              84-1100630
       (State or other jurisdiction of  (I.R.S. Employer Identification Number)
        incorporation or organization)

                                 1645 BROADWAY
                            BOULDER, COLORADO 80302
          (Address of principal executive offices, including zip code)

                                 (303) 440-5220
              (Registrant's telephone number, including area code)


       Securities registered pursuant to Section 12(b) of the Act:  None

          Securities registered pursuant to Section 12(g) of the Act:

                              Title of Each Class
                              -------------------
                                        
                         Common Stock,  $.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes  (X)  No  ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)

As of March 9, 1998, the aggregate market value of the voting stock held by non-
affiliates (as defined by the regulations of the Securities and Exchange
Commission) of the Registrant was $285,242,307, based upon the closing sale
price of such stock on such date as reported on the NASDAQ National Market.  As
of March 9, 1998, the total number of shares outstanding of the Registrant's
common stock, $.001 par value, was 12,807,889 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended December 27, 1997 have been incorporated by reference into Parts II and IV
of this report on Form 10-K.  Portions of the definitive Proxy Statement for the
Registrant's Annual Meeting of Stockholders to be held on May 4, 1998, have been
incorporated by reference into Part III of this report.
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                               TABLE OF CONTENTS
<TABLE>
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                                                                                               PAGE
<S>                                                                                            <C>
 
PART I.
 
Item 1.  Business.                                                                                1
 
Item 2.  Properties.                                                                              9
 
Item 3.  Legal Proceedings.                                                                      11
 
Item 4.  Submission of Matters to a Vote of Security Holders.                                    11
 
PART II.
 
Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.                  11
 
Item 6.  Selected Financial Data.                                                                11
 
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.  11
 
Item 8.  Financial Statements and Supplementary Data.                                            11
 
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.   12
 
PART III.
 
Item 10. Directors and Executive Officers of the Registrant.                                     12
 
Item 11. Executive Compensation.                                                                 12
 
Item 12. Security Ownership of Certain Beneficial Owners and Management.                         12
 
Item 13. Certain Relationships and Related Transactions.                                         12
 
PART IV.
 
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.                     12-14
</TABLE>
<PAGE>
 
PART I.

ITEM 1.                      BUSINESS


INTRODUCTION

  Wild Oats Markets, Inc. (the "Company" or "Wild Oats") is the second largest
natural foods supermarket chain in North America.  As of March 9, 1998, the
Company operated 54 stores under the names "Wild Oats Community Market,"
"Alfalfa's Market," "Sunshine Grocery" and "Oasis Fine Foods" in 12 states:
Arizona, California, Colorado, Florida, Illinois, Kansas, Missouri, Nevada, New
Mexico, Oregon, Tennessee and Utah and under the name "Capers Whole Foods
Markets" in British Columbia, Canada.  The Company is dedicated to providing a
broad selection of high quality natural and gourmet foods and related products
at competitive prices in an inviting and educational store environment
emphasizing customer service.  The Company's stores range in size from 5,000 to
35,000 square feet and feature natural alternatives in virtually every product
category found in conventional supermarkets, providing consumers with a one-
stop, full-service shopping alternative to both conventional supermarkets and
traditional health food stores.

  Since acquiring its first natural foods store in 1987, Wild Oats has pursued
an aggressive growth strategy. The Company has grown from eleven natural foods
stores at the end of 1993 to 52 stores in twelve states and Canada at the end of
1997, representing a compound annual growth rate of 45%. The Company's sales
increased from $47.3 million in 1993 to $311.1 million in 1997,  representing a
compound annual growth rate of 60%.

  The Company's growth has been driven by the acquisition of independent and
small chain natural foods store operators, the opening of new stores and
positive comparable store sales growth.  In 1997, Wild Oats acquired 9 stores,
opened four new stores and relocated one store.  As a result of the Company's
aggressive growth, the Company has increased its penetration of existing
markets, entered new geographic markets and created a stronger platform for
future growth.  During 1997, the Company successfully entered a number of new
regions, including Arizona, Illinois, Oregon and Tennessee. The Company believes
its growth has resulted in operating efficiencies created by: (i) warehousing,
distribution and administrative economies of scale; (ii) improved merchandise
buying terms as a result of the Company's larger size; and (iii) coordinated
merchandising and marketing strategies.

NATURAL FOODS INDUSTRY

  Natural foods are defined as foods which are minimally processed, free of
artificial ingredients, preservatives and other non-naturally occurring
chemicals and, in general, are as near to their whole, natural state as
possible.  Most natural products fall into the food category, but the natural
foods industry also encompasses a number of other categories such as naturally-
based cosmetics, toiletries and personal care items, vitamins and herbal
supplements, natural and homeopathic medicines and naturally-based cleaning
agents.  While sales growth in the traditional supermarket industry remained
relatively flat, from 1992 to 1996, the natural foods industry grew at a 21%
compound annual growth rate.  According to The Natural Foods Merchandiser, a
leading industry publication, growth in the natural foods industry has
accelerated from a 15% increase in sales in 1992 to a 25% increase in 1996, when
the market reached $11.5 billion. The Company believes that this growth reflects
a broadening of the natural foods consumer base which is being propelled by
several factors, including healthier eating patterns, increasing concern
regarding food purity and safety, and greater environmental awareness.  While
natural products generally have higher costs of production and correspondingly
higher retail prices, the Company believes that a growing segment of the
population now attributes added value to high quality natural products and is
willing to pay a premium for such products.  Indeed, while early growth in the
industry was attributed to more educated, wealthier consumers, there is
increasing evidence that the mainstream consumer is driving much of the recent
growth. Further, according to industry data, the natural foods industry
comprises less than 3% of the total supermarket industry, allowing for
significant potential to continue to expand the customer base.

  Traditional natural foods stores, offering only vitamins, dietary supplements,
herbs and a limited selection of natural foods product lines, first emerged over
50 years ago.  Over the years, as consumer demand for natural foods has
increased, the number of natural foods stores has grown and the product mix has
expanded.  More 

                                       1
<PAGE>
 
distributors and vendors have entered the natural foods industry and many more
natural products have become available. In response to increasing supply and
demand, larger format natural foods stores have emerged, offering virtually
every product category found in a conventional supermarket, including grocery,
produce, meat, poultry, seafood, dairy, frozen, deli, bakery, health and body
care and household items. Today natural foods stores offer a one-stop, full-
service grocery shopping alternative to conventional supermarkets and appeal to
a broader, more mainstream customer base than the traditional natural foods
store.

  The Company believes that the appeal of natural foods supermarkets is based on
the quality of the total shopping experience.  Many natural foods stores develop
a personal relationship with their customers because there is typically more
interaction between the customer and the store staff than in a conventional
supermarket.  The Company believes that conventional supermarkets historically
have had only limited success in competing in the natural foods segment because
they are largely dependent on national brands.  As a result, while conventional
supermarkets may carry a limited selection of natural foods products, it is
difficult for them to duplicate the inventory of natural foods stores which
carry a more comprehensive selection of natural products sourced from a large
number of independent vendors.

  The natural foods industry is highly fragmented.  According to The Natural
Foods Merchandiser, there were approximately 6,700 independent natural/health
foods stores in 1996, and management believes that only 12% of these stores were
full-service, natural foods stores (defined as stores having a minimum of 8,000
square feet and generating at least 40% of their sales from food.)  The Company
believes that the two largest natural foods retailers (Wild Oats and Whole Foods
Markets, Inc.) represented approximately 10% of the total natural foods dollars
spent by consumers in 1996.  There has been considerable consolidation in the
industry as natural foods supermarket chains have acquired smaller independent
competitors.  The Company believes natural foods supermarkets, with their
extensive product offerings and broad customer appeal, will continue to lead the
overall growth and consolidation in the natural foods industry.

OPERATING STRATEGY

  The Company's objective is to become the grocery store of choice both for
natural foods shoppers and quality-conscious consumers in each of its markets by
emphasizing the following key elements of its operating strategy:

  Destination Format.  The Company's stores are one-stop, full-service
supermarkets for customers seeking high quality natural and gourmet foods and
related products.  In most of its stores, the Company offers between 10,000 and
25,000 store-keeping units ("SKUs") of natural products in virtually every
product category found in a conventional supermarket.  The Company's stores
carry a much broader selection of natural and gourmet foods and related products
than those offered by typical independent natural foods stores or conventional
supermarkets.

  High Quality, Unique Products.  The Company seeks to offer the highest quality
products throughout its merchandise categories and emphasizes unique products
and brands not typically found in conventional supermarkets.  The Company's
strict quality standards require products to be minimally processed, free of
preservatives, artificial colors and chemical additives, and not tested on
animals.  Each store tailors its product mix to meet the preference of the local
market, in particular sourcing produce from local organic growers whenever
possible.  The Company also operates regional commissary kitchens and bakeries
that provide its stores with fresh bakery items and a unique assortment of
prepared foods for the quality and health-conscious consumer.

  Educational and Entertaining Store Environment.  At Wild Oats, shopping is
"theater."  The Company strives to create a fun, friendly and educational
environment that makes grocery shopping enjoyable and encourages shoppers to
spend more time in the store and to purchase new products.  In order to enhance
customers' understanding of natural foods and how to prepare them, the Company
trains its store staff to educate customers as to the benefits and quality of
its products and prominently features educational brochures and newsletters as
well as an in-store consumer information department.  In addition, many stores
offer cafe seating areas, espresso and fresh juice bars, and in-store massage
therapists, all of which emphasize the comfortable, relaxed nature of the
shopping 

                                       2
<PAGE>
 
experience. The Company believes its knowledgeable store staff and high ratio of
store staff to customers results in significantly higher levels of customer
service than in a conventional supermarket.

  Extensive Community Involvement.  The Company seeks to engender customer
loyalty by demonstrating its high degree of commitment to the local community.
In addition to the Company's national charitable contributions, each store makes
significant monetary and in-kind contributions to local not-for-profit
organizations through programs such as "5% Days," where each store donates 5% of
its gross sales one day each month to a local not-for-profit group, and a
"Charity Work Benefit" where the Company pays employees for time spent working
for local charities.

  Flexible Store Format.  The Company's flexible store format enables it to
customize its stores to specific site characteristics and to meet the unique
needs of a variety of markets.  The Company's supermarket format stores are
adapted in size and product selection to suburban markets and its urban format
stores are designed to appeal in size and product selection to more densely
populated urban markets.  The Company believes that this flexible store format
strategy allows it to operate successfully in diverse markets, enabling it to
reach a broader customer base and increase market penetration.

  Competitive Pricing.  The Company seeks to offer products at prices which are
at or below those of other natural foods stores.  The Company has implemented a
competitive price program designed to ensure that high quality, all natural
items in each product category are offered at prices that are competitive with
those offered on similar items in conventional supermarkets.  The Company has
also introduced its "Wild Shopper Card" program under which the customer
receives additional discounts on selected items when his/her card is presented
at the register.  The Company believes these pricing programs broaden its
consumer appeal and encourage its customers to fill more of their shopping needs
at the Company's stores.

  Motivated Staff.  The Company has developed a unique culture by encouraging
active participation and communication among all staff members, advocating
store-level participation in a variety of marketing, merchandising and operating
decisions and rewarding staff based upon the achievement of targeted store-level
sales and other financial performance criteria.  In addition, the Company
generally hires individuals dedicated to the concept of natural foods and a
healthy lifestyle.  The Company believes that these practices translate into a
satisfied and motivated staff and a high level of customer service.

GROWTH STRATEGY

  The Company has grown from eleven natural foods stores at the end of 1993 to
54 stores in 12 states and Canada as of March 9, 1998.  The Company's growth
strategy is to increase sales and income through: (i) new store expansion; (ii)
acquisitions of existing compatible stores; and (iii) increased sales at
existing stores.

  In fiscal 1998, the Company has acquired one store and opened two new stores
as of March 9, 1998, and plans to open or acquire up to nine more stores in
1998.  The Company intends to continue its expansion strategy by increasing
penetration in existing markets and expanding into new regions which it believes
are currently underserved by natural foods retailers. While the Company believes
that most of its new store expansion will result from new store openings, it
continues to evaluate acquisition opportunities in both existing and new
markets.

  The Company currently has leases signed or property acquired or identified and
under contract for eight new stores projected to be opened in fiscal 1998, and
three new sites and two relocations projected to be opened in fiscal 1999, as
follows:

                                       3
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<TABLE>
<CAPTION>
                                     Projected                                                    Projected
                                     ---------                                                    ---------
Site Name                           Opening Date         Site Name                               Opening Date
---------                           ------------         ---------                               ------------
<S>                                 <C>                  <C>                                     <C>
1.   Princeton, NJ                      1998             8.   Las Vegas, NV                           1998
2.   Santa Monica, CA                   1998             9.   Kansas City, MO                         1999
3.   Columbus, OH                       1998             10.  Miami, FL                               1999
4.   Denver, CO                         1998             11.  Eugene, OR                              1999
5.   Miami Beach, FL                    1998             12.  Santa Fe, NM*                           1999
6.   Hinsdale, IL                       1998             13.  Ft. Collins, CO*                        1999
7.   Dallas, TX                         1998
 
*Relocation
</TABLE>

  New Store Expansion. In fiscal 1997, the Company opened four new stores in
Sacramento and Laguna Beach, California; Buffalo Grove, Illinois; and Lakewood,
Colorado and relocated a store in Scottsdale, Arizona. The Company closed its
San Francisco, California, store in October 1997, and sold its Vail, Colorado,
store operations in December 1997. Through March 9, 1998, the Company in 1998
had opened two new stores in Pinecrest, Florida, and Westminster, Colorado.

  Acquisitions of Existing Compatible Stores. During fiscal 1997, the Company
acquired nine natural foods stores: two in Eugene, Oregon; two in South Florida;
two in Memphis, Tennessee; and three in Phoenix and Scottsdale, Arizona. In
January 1998, the Company acquired one natural foods store in Nashville,
Tennessee.

  Increased Sales at Existing Stores.  The Company believes that historical
growth in sales at the Company's existing stores reflects continued strong
growth in the natural foods industry as well as improved execution of the
Company's operating strategy. The Company continually seeks to increase sales at
its existing stores and has undertaken several initiatives designed to increase
comparable store sales.  The Company is seeking to attract new customers,
generate repeat business and gradually increase the size of the average
transaction by introducing, expanding and improving key merchandise categories
such as perishables (produce, deli and prepared foods) and private label
products, as well as implementing expanded marketing programs and expanding
customer service.

SITE SELECTION AND STORE FORMAT

  Prior to opening or acquiring a store, the Company analyzes the local market,
including: (i) certain demographic data, such as educational levels, average
income, population density and age distribution; (ii) certain lifestyle data,
such as the levels of cultural awareness, physical exercise, health
consciousness and environmental awareness in the community; and (iii) the
existing competition.  In addition to performing internal market analysis, the
Company frequently engages an outside consultant to conduct additional market
studies and validate internal sales forecasts.  The Company's flexible strategy
allows it to open stores in a variety of locations and adapt its store layout
and merchandise selection to accommodate specific site characteristics, regional
themes and local cultural traditions.  The Company seeks locations of
approximately 15,000 to 35,000 square feet for its supermarket format stores and
generally seeks to be either an anchor tenant in a regional neighborhood
shopping center or a stand-alone store with high visibility, easy access and
plenty of parking.  The Company seeks locations of approximately 5,000 to 15,000
square feet for urban format stores and generally seeks to be in the commercial
district of densely populated residential areas with convenient parking and a
high level of foot traffic.

  When the Company acquires a store, it remodels the store in accordance with
the Company's specifications.  These acquired stores remain in operation while
they are being remodeled and, if the stores are to be renamed "Wild Oats
Community Market," they are not renamed until the remodeling is completed.  The
timing and cost of the remodel of each store varies depending on the location of
the store and whether it is in a new or existing market for the Company, the
size of the store and the required build-out.  The Company typically requires
eight to 16 weeks to remodel a store.

                                       4
<PAGE>
 
PRODUCTS

  The Company offers its customers a broad selection of unique, high-quality
products that are natural alternatives to those found in conventional
supermarkets.  The Company typically does not offer well known national brands
and focuses instead on a comprehensive selection of natural products within each
category. Although the core merchandise assortment is similar at each of the
Company's stores, individual stores adapt the product mix to reflect local and
regional preferences.  Stores source produce from local organic growers whenever
possible and typically offer a variety of local products unique to the region.
In addition, in certain markets, stores may offer more food service, gourmet and
ethnic items as well as feature more value-added services such as gift baskets,
catering and home delivery, and in other markets, a store may focus more on bulk
foods, produce and staple grocery items.  The Company and its stores regularly
introduce new high-quality and locally grown products in its merchandise
selection to minimize overlap with products carried by conventional
supermarkets.

  In addition, the Company intends to continue to expand and enhance its
prepared food and in-store cafe environment.  The Company believes that
consumers are increasingly seeking convenient, healthy, "ready-to-eat" meals and
that by increasing its commitment to this category it can provide an added
service to its customers, broaden its customer base, and further differentiate
itself from conventional supermarkets and traditional natural foods stores.

  Quality Standards.  The Company's objective is to offer products which meet
the following standards: free of preservatives, artificial colors, chemical
additives and added hormones; organically grown, whenever possible; minimally
processed; and not tested on animals.  The Company continually evaluates new
products, quality issues and controversial ingredients and frequently counsels
store managers on compliance with the Company's strict product standards.

Product Categories.   The Company's stores typically feature the following
product categories:

PRODUCT CATEGORY  DESCRIPTION
----------------  -----------

Grocery           Pastas, canned goods, cereals, cooking oils, juices, salad
                  dressings, crackers, chips, pretzels, cookies, baking items,
                  sodas, bottled waters, and beer and wine in selected stores.
                  Many products are formulated for special diets and are
                  identified as fat-free, low-sodium, wheat-free or dairy-free;

Natural Living    Vitamins, supplements, herbs and body care items such as
                  shampoos, lotions, cosmetics, deodorants, dental care
                  products, nutritional supplements, herbal tinctures, bulk
                  herbs and homeopathic remedies as well as a selection of
                  health-related books and magazines;

Prepared Foods    Hot entrees, salads, sushi, wraps, pizza and pasta which can
                  be taken out or, in the larger stores, eaten in the store's
                  cafe seating area. Most stores feature full-service delis as
                  well as espresso and fresh juice bars;

Produce           Majority of produce is organically grown, although the
                  availability varies, and is sourced seasonally from local
                  organic farmers whenever possible. All produce is clearly
                  labeled as to whether it was grown organically or
                  commercially;

Dairy/Frozen      Dairy products, both organic and commercial, such as yogurt,
                  milk, cheese, eggs, soy milk, soy foods, and fresh juices, and
                  frozen products such as ice cream, frozen yogurt, entrees,
                  vegetables, desserts, juices, meat and meat substitutes;

Meat/Poultry/
 Seafood          Fresh beef, lamb, pork, seafood and free-range poultry, as
                  well as value-added meat products such as stuffed peppers,
                  marinated meats and home-made sausages;

                                       5
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Baked Goods       Muffins, cakes, breads and pies, which are supplied by both
                  the Company's bakeries and outside vendors, and signature
                  items including a proprietary line of private label gourmet
                  breads;

Bulk Products     Generally between 200 and 500 SKUs of bulk products, including
                  beans, pastas, grains, rice, coffee, granolas, snacks, nuts,
                  flours, seeds, dried fruits, soaps, detergents, shampoos and
                  conditioners; and

General 
 Merchandise      Environmentally-friendly cleaning compounds, housewares,
                  kitchen tools, recycled paper products and other natural
                  household items, as well as selected gift items, such as
                  natural fiber clothing, greeting cards and decorative
                  glassware.

  Private Label.  The natural foods industry is highly fragmented and
characterized by many small independent vendors.  As a result, the Company
believes that its customers do not have strong loyalty to particular brands of
natural foods products.  In contrast to conventional supermarkets whose private
label products are intended to be low cost alternatives to name-brand products,
the Company has developed a private label program in order to build brand
loyalty to specific products based on its relationship with its customers and
its reputation as a natural foods authority.  Through this program, Wild Oats
has successfully introduced a number of high quality, unique private label
products, such as chocolate bars, gourmet breads, salsa, salad dressings,
vitamins, chips, pretzels, tortillas, juices, pasta, pasta sauces, oils, and
canned fruit.  The Company intends to continue to expand its private label
product offerings on a selected basis, and anticipates doubling the number of
private label SKUs in the next twelve to eighteen months.

  Pricing.  In general, natural and gourmet foods and related products have
higher costs of production and correspondingly higher retail prices than
conventional grocery items.  The Company's pricing strategy has been to maintain
prices that are at or below those of its natural foods competitors while
educating its customers as to the higher quality and added value of its products
so as to differentiate them from conventional products.  Like most conventional
supermarkets, the Company regularly features dozens of sale items, including
"buy one-get one free" items, that are rotated periodically.  In 1997, the
Company introduced its "Wild Shopper Card" on a test basis at selected Colorado
stores.  In 1998, the Company intends to introduce the "Wild Shopper Card" in
the remainder of its United States stores.  The Company offers additional
savings on selected items each month when the customer presents his/her card at
the register.  The Company regularly monitors the prices at its natural foods
and conventional supermarket competitors to ensure its prices remain
competitive.

STORE ENVIRONMENT

  At Wild Oats, shopping is "theater." Each store strives to create a fun,
friendly and educational environment that makes grocery shopping enjoyable and
encourages shoppers to spend more time in the store and to purchase new
products.  In order to enhance customers' understanding of natural foods and how
to prepare them, the Company trains its store staff to educate customers as to
the benefits and quality of its products and prominently features educational
brochures and newsletters as well as an in-store consumer information
department.  Product brochures, recipe card areas, food sampling stations and
informational signage are used extensively throughout the store.  Most stores
offer cafe seating areas, espresso and fresh juice bars, in-store nutritional
consultants, and in-store massage therapists, all of which emphasize the
comfortable, relaxed nature of the Wild Oats shopping experience.  In addition,
each store features a monthly calendar of special events such as educational
presentations, children's events, cooking classes, live music, prize drawings
and dog washes.  Certain departments are remerchandised several times a year
according to seasonal themes or different marketing campaigns, such as Rain
Forest Month or Organic Harvest Month. The stores also sponsor many community-
related activities such as presentations on health and safety as well as fund-
raising drives for local organizations.  The Company encourages and receives
feedback from its customers through its suggestion boxes and posts responses on
the stores' community bulletin board.

                                       6
<PAGE>
 
COMPANY CULTURE AND STORE OPERATIONS

  Company Culture.  The Company's culture is embodied in its "Four Areas of
Responsibility": responsibility to its customers, its staff, its community and
its bottom line.  In particular, Wild Oats believes that knowledgeable,
satisfied and motivated staff members have a direct impact on store performance
and overall profitability.  Wild Oats encourages active participation and open
communication among all staff members and advocates store-level participation in
a variety of marketing, merchandising and operating decisions.  The Company has
made a substantial commitment to staff education and has created an in-house
training program which consists of an intensive orientation for new hires and
mandatory monthly and quarterly education programs for the general staff.  The
Company generally hires individuals dedicated to the concept of natural foods
and a healthy lifestyle and seeks to promote store-level employees to positions
of increasing responsibility.

  Management and Employees.  The Company's stores are organized into 10
geographic regions, each of which has a regional director who is responsible for
the store operations within his or her region and who reports to the Company's
senior management.  The Company's regional directors are responsible for, and
frequently visit, their cluster of stores to monitor financial performance and
ensure adherence to the Company's operating standards. The typical staff of a
Wild Oats store consists of one store manager, ten department managers and
between 25 to 200 additional hourly staff members, most of whom work full time.
Store and department managers are responsible for the operations of individual
stores including recruiting and hiring store personnel, communicating financial
results nightly, coordinating merchandise ordering, distribution and receiving,
and to a limited extent, supplementing their stores' merchandise mix with
regional and other products suited for their specific market.  The accounting
department provides a detailed monthly financial analysis of every department in
each store which is reviewed by both the store and regional managers.  The
Company maintains a staff of corporate level department specialists including
Natural Living, Prepared Foods, Produce, Meat/Poultry/Seafood and Grocery
coordinators who manage centralized buying programs and assist in store-level
merchandising, pricing and staff training to ensure Company-wide adherence to
product standards and store concept.

  All regional directors and store managers and certain store-level staff
participate in an incentive plan that ties compensation awards to the
achievement of specified store-level sales, profitability and other financial
performance criteria.  The Company also seeks to foster enthusiasm and
dedication in its staff members through comprehensive benefits packages
including health insurance and wellness programs as well as an employer matching
401(k) plan and equity incentive plans.

PURCHASING AND DISTRIBUTION

  The Company has a centralized purchasing function which sets product
standards, approves products and negotiates volume purchase discount
arrangements with distributors and vendors.  Individual store purchases are
handled through its department managers who make purchasing decisions within
these established parameters.  This approach enables each store to customize its
product mix to meet the needs and preferences of its customers while adhering to
the Company's established product standards and allowing each store to benefit
from the Company's volume purchasing discounts.

  The wholesale segment of the natural foods industry provides a large and
growing array of product choices across the full range of grocery product
categories.  Although the Company purchases products from more than 3,000
suppliers, the Company purchases approximately 25% of its products from a single
wholesale distributor that operates multiple warehouses nationwide.  The Company
believes that this distributor is able to service all of the Company's existing
stores as well as most of its future sites.  As a result of its rapid growth,
the Company has been able to negotiate greater volume discounts with this
distributor and certain other vendors.  The Company has no supply contracts with
the majority of these parties and any vendor or distributor could discontinue
selling to the Company at any time. The Company believes that it could develop
alternative sources of supply; however, any such termination may create a short-
term disruption in store-level merchandise selection.  The Company has executed
favorable regional or national purchasing agreements with the manufacturers of
certain products, such as dairy and coffee, under which the Company receives
volume discounts and other incentives to buy larger quantities of 

                                       7
<PAGE>
 
product. The Company is a party to an interim buying agreement with a
distributor in Vancouver, British Columbia, Canada under which the Company is
obligated to purchase certain products from the distributor for its existing
Canadian stores, provided the purchase price is the lowest price offered from
the Company's various distributors in that region.

  Most products are delivered directly to the stores by vendors and
distributors.  The Company currently operates a consolidated warehouse facility
in Denver which receives and distributes truck load purchases of produce and
grocery items and distributes products that cannot be delivered directly to the
stores by outside vendors.  The Company maintains a small fleet of local
delivery vans and over-the-road trucks.  As the Company enters new markets it
will review the need for additional warehouse and distribution facilities.

  The Company operates six commissary kitchens in Santa Fe, New Mexico, Denver,
Colorado, Phoenix, Arizona, Pinecrest, Florida and Los Angeles and San
Francisco, California, as well as a bakery in Denver, Colorado.  These
facilities produce deli food, take out food, bakery products and certain private
label items exclusively for sale in the Company's stores.  Each kitchen can make
daily deliveries to stores within a hundred mile radius of the facility. The
Company intends to add new kitchens as it expands into new markets.

MARKETING

  The Company's marketing programs are primarily focused on in-store customer
education and information.  The Company believes that its customers are more
responsive to the quality of the shopping experience, issue-based marketing and
word-of-mouth advertising than to price-based marketing and traditional media
advertising.  As a result, the Company focuses on consumer education and
emphasizes the benefits and quality of its products such as the fact that an
item is organic or grown locally.  The Company uses a variety of media,
including in-store fliers, newspaper inserts and promotional brochures in which
it promotes the depth of its merchandise selection, benefits of natural
products, and "down to earth" competitive prices, including "buy one-get one
free" and "two for one" pricing promotions.  In the fourth quarter of 1997, the
Company introduced the "Wild Shopper Program(TM)," a customer loyalty program
that gives frequent customers discounts on purchases when they use their "Wild
Shopper Card," at its Colorado stores and plans to implement the program
nationwide in 1998.  When the Company first enters a new market, the Company
executes an intense marketing campaign to build awareness of its new store and
its selection of natural products.  After the initial campaign, this advertising
is replaced by the marketing strategies described above.

  The Company's advertising costs historically have been less than 1.5% of
sales.  The Company recently introduced a multifaceted promotional program to
its vendors for 1998 which allows for different degrees of promotional
participation and commits vendors to full year expenditures in advance. In
exchange for participation in the Company's new promotional program, commencing
in 1998 vendors will receive access to national advertising programs, detailed
feedback on volume movement and the ability for longer term production planning.

MANAGEMENT INFORMATION SYSTEMS

  The Company's management information systems have been designed to provide
detailed store-level financial data, including sales, gross margin, payroll and
store contribution, to regional and store managers and to the Company's
headquarters on a timely basis.  Currently, certain store-level accounting and
inventory management systems are processed manually.  The Company purchased a
software system to convert the store level point-of-sale and pricing systems to
one system and to track product movement, and is in the process of installing
new hardware to run such software and implement such system.  The Company has
converted more than half of its stores to the new hardware and anticipates that
the remaining stores will be converted by the end of 1998.  All new stores will
be using the new hardware and system going forward.  Certain Wild Oats stores
are not currently on an automated point-of-sale and pricing system.  The Company
is currently implementing new, faster credit card processing systems Company-
wide to reduce transaction time at the cash register and the cost to the Company
of individual credit card transactions. The Company has designed and is in the
process of implementing a wide-area network to allow faster data transmissions
between the Company's headquarters and stores, and between the stores and the
Company's credit card processor.  These new systems are expected to be
operational in all of the Company's stores 

                                       8
<PAGE>
 
by the third quarter of 1998. In the first quarter of 1998, the Company
purchased new accounting, payroll and human resources software to improve the
efficiency of the Company's accounting and payroll systems. The Company has
determined that all of its major computer systems are year 2000 compliant and
that the cash registers being installed in the Company's stores are year 2000
compliant. The Company is currently requesting year 2000 compliance
certification from its major vendors, service providers and financial
institutions. The Company does not anticipate that it will incur any material
expense related to year 2000 compliance in any financial year.

COMPETITION

  The Company's competitors currently include other independent and multi-unit
natural foods supermarkets, smaller traditional natural foods stores,
conventional supermarkets and specialty grocery stores. While certain
conventional supermarkets, smaller traditional natural foods stores and small
specialty stores do not offer as full a range of products as the Company, they
do compete with Wild Oats in one or more product categories.  A number of other
natural foods supermarkets offer a range of natural foods products similar to
those offered in the Company's stores.  The Company believes that the principal
competitive factors in the natural foods industry include customer service,
quality and variety of selection, store location and convenience, price and
store atmosphere.  The Company believes that its primary competitor is Whole
Foods Markets, Inc., a publicly-traded company based in Texas which, as of
January 18, 1998, had 82 stores and gross annual sales of approximately $1.1
billion.  The Company currently competes with Whole Foods in California,
Colorado, Florida and Illinois.  In the first quarter of 1998, Whole Foods
opened a 39,000 square foot store in Boulder, Colorado, where the Company's
headquarters and three of its stores are currently located.  At this time the
Company cannot evaluate what, if any, long-term impact increased competition
from Whole Foods will have on its overall sales from its Boulder stores.  The
Company's Boulder, Colorado stores account for less than 10% of the Company's
overall sales revenues.

EMPLOYEES

  As of March 9, 1998, the Company employed 2,362 individuals full-time and
2,221 individuals part-time.  Approximately 4,372 of the Company's employees are
engaged at the store-level and 211 are devoted to regional administrative and
corporate activities.  The Company believes that it maintains a good
relationship with its employees.  One small group of employees at one of its
acquired stores was unionized at the time of the store's acquisition and
continues to be unionized. The Company anticipates that in the future one or
more of its stores may be the subject of attempted organizational campaigns by
labor unions representing grocery industry workers, and that from time to time
certain of its stores may be picketed by local labor unions relating to area
wage and benefit standards.

TRADEMARKS

  Wild Oats(R), and Wild Oats Community Markets(R) are federally registered
trademarks and Alfalfa's Market/(TM)/, Oasis Fine Foods/(TM)/, Sunshine
Grocery/(TM)/ and Capers Whole Foods Market/(TM)/ are trademarks owned by the
Company.


ITEM 2.                            PROPERTIES

  The Company currently leases an aggregate of approximately 14,500 square feet
for its corporate offices in Boulder, Colorado.  The lease for the corporate
headquarters expires in October 2006 and has a renewal option for an additional
six year term.  The rental payment is a fixed base rate.  The lease for the
Company's 13,500 square foot warehouse in Denver expires in August 1999 and is
subject to two renewal options of three years each.  The rental payment is a
fixed base rate.

  The Company leases the majority of its currently operating stores. The Company
currently has leases signed or property acquired or under contract for eight new
stores projected to be opened in 1998, and an additional three sites and two
relocations projected to be opened in 1999.  In 1997, the Company purchased real
property in Westminster, Colorado and Hinsdale, Illinois, for the construction
of new stores opened in the first quarter of 1998 

                                       9
<PAGE>
 
and projected to be opened in the third quarter of 1998, respectively, and a
ground leasehold interest in Denver, Colorado, for the construction of a new
store projected to be opened in the third quarter of 1998. The Company also
purchased the real property underlying its Fort Collins, Colorado, Alfalfa's
Market store, and has executed a contract to purchase additional property in
Fort Collins, Colorado. The Company anticipates that it will sell all or
substantially all of the real property it currently owns under sale and
leaseback transactions, where the purchaser will lease the properties back to
the Company under market terms. The Company's leases typically provide for a 
ten-year base term and generally have several renewal periods. The rental
payments are either fixed base rates or percentages of sales with minimum
rentals. All of the leases are accounted for as operating leases.

STORE LOCATIONS

  The following map and store list show the number of stores that the Company
operates in each state and the cities in which the Company's stores are located
as of March 9, 1998.

                      [MAP OF UNITED STATES APPEARS HERE]

ARIZONA            COLORADO            ILLINOIS         OREGON
-------            --------            --------         ------      
Phoenix (2)        Aurora              Buffalo Grove    Eugene (2)
Scottsdale (1)     Boulder (3)
                   Colorado Springs    KANSAS           TENNESSEE
                   Denver (4)          ------           ---------        
CALIFORNIA         Fort Collins (2)    Mission          Memphis (2)
----------         Greenwood Village                    Nashville 
Berkeley           Lakewood                    
Mission Viejo      Littleton           MISSOURI
Laguna Beach       Westminster         --------      
Los Angeles                            Kansas City      UTAH
Pasadena           FLORIDA             St. Louis        ----             
Sacramento         -------                              Salt Lake City (3)
San Anselmo        Boca Raton      
Santa Monica       Fort Lauderdale     NEVADA           BRITISH COLUMBIA,
Sunnyvale          Pinecrest           ------           -----------------
West Hollywood     West Palm Beach     Las Vegas (2)    CANADA
                                                        ------             
                                                        Vancouver (2)
                                       NEW MEXICO       West Vancouver
                                       ----------      
                                       Albuquerque (2)
                                       Santa Fe (3)    



                                       10
<PAGE>
 
ITEM 3.                  LEGAL PROCEEDINGS

  Alfalfa's Canada, Inc., the Company's Canadian subsidiary, is a defendant in a
suit brought in the Supreme Court of British Columbia, by one of its
distributors, Waysafer Wholefoods Limited and one of its principals, seeking
monetary damages for breach of contract and injunctive relief to enforce a
buying agreement for the three Canadian stores entered into by a predecessor of
Alfalfa's Canada.  Under the buying agreement, the stores must buy products
carried by the plaintiff if such are offered at the current advertised price of
its competitors.  The suit was filed in September 1996 but there has been no
active pursuit of the litigation to date.  The Company does not believe its
potential exposure in connection with the suit to be material.  There are no
other material pending legal proceedings to which the Company or its
subsidiaries are a party.  From time to time, the Company is involved in
lawsuits that the Company considers to be in the normal course of its business.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1997.


PART II.

ITEM 5.         MARKET FOR REGISTRANT'S COMMON EQUITY
                  AND RELATED STOCKHOLDER MATTERS

  The Company's common stock is traded on the Nasdaq National Market under the
symbol "OATS".

  The following are the quarterly high and low sales prices (adjusted for the 3-
for-2 split described below) for the Company's common stock on the Nasdaq
National Market from October 22, 1996, the date of the Company's initial public
offering, through December 27, 1997, the end of fiscal 1997:
<TABLE>
<CAPTION>
 
                                  High    Low
                                 ------  ------
<S>                              <C>     <C>
 
          Fourth Quarter 1996    $18.00  $12.00
          First Quarter 1997      13.00    8.58
          Second Quarter 1997     19.08    9.25
          Third Quarter 1997      21.00   14.75
          Fourth Quarter 1997     29.00   19.42
</TABLE>

     As of  March 9, 1998, the Company's common stock was held by 839
stockholders of record.  No cash dividends have been declared previously on the
Company's common stock, and the Company does not anticipate declaring a cash
dividend in the near future.  On January 7, 1998, the Company effected a 3-for-2
stock split of its common stock  for securities held of record as of December
22, 1997.


ITEM 6.                SELECTED FINANCIAL DATA

  The information included under the caption "Selected Financial Data" from the
Company's 1997 Annual Report to Stockholders is incorporated herein by
reference.


ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The information included under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 1997
Annual Report to Stockholders is incorporated herein by reference.

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information included in the financial statements and footnotes thereto
in the Company's 1997 Annual Report to Stockholders is incorporated herein by
reference.

                                       11
<PAGE>
 
ITEM 9.                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                          ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.


PART III.

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information included under the captions "Election of Directors" and
"Executive Compensation-Management-Executive Officers" in the Company's
definitive Proxy Statement in connection with the Annual Meeting of stockholders
to be held May 4, 1998, to be filed with the Commission on or before April 27,
1998, is incorporated herein by reference.

ITEM 11.               EXECUTIVE COMPENSATION

     The information included under the caption "Executive Compensation" in the
Company's definitive Proxy Statement in connection with the Annual Meeting of
stockholders to be held May 4, 1998, to be filed with the Commission on or
before April 27, 1998, is incorporated herein by reference.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                          OWNERS AND MANAGEMENT

     The information included under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy Statement in
connection with the Annual Meeting of stockholders to be held May 4, 1998, to be
filed with the Commission on or before April 27, 1998, is incorporated herein by
reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information included under the caption "Directors and Executive
Officers - Certain Transactions" in the Company's definitive Proxy Statement in
connection with the Annual Meeting of stockholders to be held May 4, 1998, to be
filed with the Commission on or before April 27, 1998, is incorporated herein by
reference.

PART IV.

ITEM 14.         EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                        AND REPORTS ON FORM 8-K
 
     (a) The following are filed as a part of this Report on Form 10-K:

     (1)     Consolidated Statement of Operations
             Consolidated Balance Sheet
             Consolidated Statement of Changes in Stockholders' Equity (Deficit)
             Consolidated Statement of  Cash Flows

     (2) Schedule II - Valuation and Qualifying Accounts


     (b) Reports on Form 8-K.  One report on Form 8-K was filed on November 14,
1997, supplementing the financial information contained in the Registrant's
Annual Report on Form 10-K for the year ended December 28, 1996.  The report
included a Pro Forma Condensed Statement of Operations (unaudited) for the year
ended December 28, 1996.

     (c) Exhibits

     The following exhibits to this Form 10-K are filed pursuant to the
requirements of Item 601 of Regulation S-K:

                                       12
<PAGE>
 
     EXHIBIT
     NUMBER      DESCRIPTION OF DOCUMENT
     ------      -----------------------
     3(i).1.(a)  Amended and Restated Certificate of Incorporation of the
                 Registrant.  (1)
     3(i).1.(b)  Certificate of Correction to Amended and Restated Certificate
                 of Incorporation of the Registrant.  (1)
     3(ii).1     Amended and Restated By-Laws of the Registrant.  (1)
     4.1         Reference is made to Exhibits 3(i).1 through 3(ii).1.
     4.2         Specimen stock certificate.  (2)
     10.1        Form of Indemnity Agreement between the Registrant and its 
                 directors and executive officers, with related schedule.  (2)
     10.2*       1996 Equity Incentive Plan, including forms of Options granted
                 to employees and non-employee directors thereunder. (2)
     10.3*       1996 Employee Stock Purchase Plan.  (2)
     10.4*       1993 Stock Option Plan.  (2)
     10.5*       1991 Stock Option Plan.  (2)
     10.6*       Employee Stock Ownership Plan.  (2)
     10.7*       Employment Agreement between Registrant and Michael C.
                 Gilliland, dated July 12, 1996, as amended. (2)
     10.8*       Employment Agreement between Registrant and Elizabeth C. Cook,
                 dated July 12, 1996, as amended. (2)
     10.9        Warrant to purchase Series C Preferred Stock issued to
                 Montgomery Securities dated November 14, 1994. (2)
     10.10       Amended and Restated Stockholders Agreement among the
                 Registrant and certain parties named therein dated August 1996.
                 (2)
     10.11       Registration Rights Agreement between the Registrant and
                 certain parties named therein dated July 12, 1996. (2)
     10.12       Credit Agreement between the Registrant, Bank One,
                 Indianapolis, National Association and Wells Fargo Bank dated
                 as of April 15, 1997. (3)
     10.13       Lease Agreement between Registrant and Bway Property Limited
                 Partnership for the property located at 1645 Broadway, Boulder,
                 CO dated October 5, 1992. (2)
     10.14       Lease Agreement between Registrant and Bway Property Limited
                 Partnership for the property located at 1651 Broadway, Boulder,
                 CO dated October 11, 1982. (2)
     10.15       Amendment to Lease Agreements between Registrant and Bway
                 Property Limited Partnership dated March 9, 1995 for the
                 properties located at 1645 and 1651 Broadway, Boulder, CO. (2)
     10.16       Lease Agreement between Registrant and Overland Outfitters,
                 Inc. for the property located at 1655 Broadway, Boulder, CO
                 dated April 10, 1989. (2)
     10.17       Lease between Registrant and AGF Property Management Corp. for
                 the property located at 1111-23 South Washington Street,
                 Denver, CO dated October 12, 1994. (2)
     10.18*      Employment Agreement between Registrant and James Lee, dated
                 September 30, 1996. (2)
     10.19       Agreement and Plan of Merger between the Registrant, Alfalfa's,
                 Inc. and WO Holdings, Inc. dated June 4, 1996. (2)
     13.1**      Registrant's 1997 Annual Report to Stockholders.
     21.1**      List of subsidiaries.
     23.1**      Consent of Price Waterhouse LLP.
     27.1+       Financial Data Schedule - Year Ended December 27, 1997.
     27.2+       Restated Financial Data Schedule - Nine Months Ended September
                 27, 1997.
     27.3+       Restated Financial Data Schedule - Six Months Ended June 28,
                 1997.
     27.4+       Restated Financial Data Schedule - Three Months Ended March 29,
                 1997.
     27.5+       Restated Financial Data Schedule - Year Ended December 28,
                 1996.
     27.6+       Restated Financial Data Schedule - Nine Months Ended September
                 28, 1996.

                                       13
<PAGE>
 
________________________________

*Management Compensation Plan.
**Previously filed.
+Included herewith.

(1)  Incorporated by reference from the Registrant's Form 10-K for the year
     ended December 28, 1996.  (File No. 0-21577)
(2)  Incorporated by reference from the Registrant's Registration Statement on
     Form S-1 (File No. 333-11261) filed on August 30, 1996
(3)  Incorporated by reference from the Registrant's Form 10-Q for the quarter
     ended June 28, 1997 (File No. 0-21577)

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                              Wild Oats Markets, Inc.
                              (Registrant)



Date:  June 15, 1998                By: /s/ Mary Beth Lewis
                                        -------------------
                                    Mary Beth Lewis
                                    Executive Officer, Treasurer and Chief 
                                    Financial Officer
                                    (Principal Financial and Accounting Officer)

                                       14
<PAGE>
 
SCHEDULE II
 
                            WILD OATS MARKETS, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
                                        
<TABLE>
<CAPTION>
 
 
                                   BALANCE AT  CHARGED                BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS    BEGINNING     TO                       END
  FOR THE FISCAL YEAR ENDED:        OF YEAR    EXPENSES  WRITE-OFFS     OF YEAR
<S>                                <C>         <C>       <C>          <C>
 
 
  December 31, 1994                  $ 37      $         $                $ 37
 
  December 30, 1995                    37          85         (75)          47
 
  December 28, 1996                    47         252                      299
 
  December 27, 1997                   299         273        (358)         214
</TABLE>

                                       15