Whole Foods report leaves fate of Basalt store unsettled
BASALT, Colorado The head of Whole Foods Market gave an ominous warning Wednesday that the firm will consider shrinking, delaying or abandoning plans for new stores in cases where landlords default on leases.John Mackey, chairman and CEO of the natural grocer chain, said the company has drastically reduced its growth plan to improve its cash flow in these tough economic times.Mackey didnt refer to the proposed Willits Town Center market by name, or any other specific store location. But his presentation during a report on first-quarter fiscal year earnings has implications for Basalt.The fate of the planned Basalt store is unsettled. Chicago-based developer Joseph Freed & Associates (JFA) plans to build a 44,000-square-foot supermarket at Willits Town Center. The contract with Whole Foods requires JFA to deliver a shell of the building in June. That isnt going to happen. JFA stopped construction Labor Day weekend after financing dried up. Only the foundation has been poured.If all had gone as planned, the Whole Foods in Willits was supposed to open late this year or early 2010.Mackey said Wednesday that any new supermarkets the chain opens in the future must meet tougher performance expectations than in the past.We are also tracking landlord-related deadlines for each of our leases, and if a landlord defaults, we are revisiting the lease using new operating assumptions to determine whether to move forward or negotiate for a smaller store, a delayed opening, lower rent, etc., or whether to abandon the site completely, Mackey said. We expect some additional lease terminations and square footage reductions over the next few quarters.Tim Belinski, the vice president of JFA in Basalt, said after the Whole Foods teleconference: We are continuing to work with them to ensure the store is successful.Earlier this month in an e-mail interview, Belinski said that he remained optimistic that the development firm will secure financing, complete the store and retain Whole Foods as a tenant.No doubt [Whole Foods officials] continue to see the Basalt store as a great opportunity, Belinski wrote. I hope that locally we can appreciate and somehow acknowledge that the economic backdrop is very real to businesses and has caused very real stress.I also hope Whole Foods appreciates that theres an overwhelming amount of support for them to get their store open here in Basalt as soon as possible. Im certain they wont be disappointed with it, Belinski said.Mackey said Whole Foods, like every retailer, is facing extraordinary challenges in this recession. The chain experienced its first quarter with a loss in comparable store sales in its 29-year history.He credited moves made last August to curb growth and contain costs for putting the company in a position to ride the storm out. The chain slashed 306 positions and instituted a hiring and salary freeze.The company terminated 11 leases in development and downsized nine other leases by an average of 10,000 square feet in August. For fiscal year 2009, it reduced its planned new store openings by 50 percent. The moves helped improve the chains bottom line.We believe our results demonstrate we can operationally adjust to lower sales volumes and believe that this flexibility, combined with our improved balance sheet, will allow us to successfully manage through these difficult economic times and emerge a stronger company over the long run, Mackey said in the teleconference.