By Lisa Baertlein

(Reuters) - Whole Foods Market Inc <WFM.O> on Wednesday said sales declines at established stores are easing and that its co-founder John Mackey will take over as the company's sole chief executive, sending its shares up nearly 4 percent after hours.

The pioneering organic and natural food grocer said Walter Robb, who has split CEO duties with Mackey for six years, will step aside at year end.

"The streamlining of management is seen as a good thing," said Hedgeye Risk Management analyst Howard Penney, who added that shares likely got a bump from short covering by investors who bet they would fall after the report.

The news signaled a potential turn for the company known as "Whole Paycheck". It has been lowering prices and experimenting with its new, value-oriented 365 by Whole Foods Market chain to fend off competition from traditional supermarket operators like Kroger Co <KR.N>, discounters such as Wal-Mart Stores Inc <WMT.N> and aspiring grocer Amazon.com <AMZN.O>.

Whole Foods said same-store sales were down 1.6 percent for the first month of the current quarter through Oct. 30. That was less steep than the 2.6 percent drop for the fiscal fourth quarter, which ended Sept. 25, and marked the fifth straight quarter of declines.

Austin, Texas-based Whole Foods, which said customers are buying more items per visit, forecast same-store sales that are flat to down 2 percent for fiscal 2017.

Executives said that deflation and competition pressured revenues, and that Whole Foods planned to step up its advertising, particularly over Thanksgiving and Christmas.

Fourth quarter net income rose 57 percent to $88 million, or 28 cents per share. Analysts had expected a per share profit of 24 cents for the latest quarter.

Revenue was up almost 2 percent to $3.5 billion for the quarter, held back in part by deflating prices for staples including meat and eggs.

The decision to make Mackey sole CEO on Dec. 31 puts the spotlight on an outspoken executive known for his Libertarian political views and leadership in the U.S. health food movement.

Robb told analysts the more streamlined structure is right for the company at this juncture. He will continue as a director and senior adviser to the company.

Shares of Whole Foods were up 3.9 percent to $29.63 in extended trading. The company has a relatively high percentage of short interest, pegged at 11.4 percent of shares outstanding in mid-October versus 2.0 percent on average for consumer companies.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Steve Orlfsky, Bernard Orr)