Future uncertain for new Whole Foods at Hilldale
The construction of a new Whole Foods grocery store at Hilldale Mall may be in jeopardy.
On Tuesday, Whole Foods reported a 30 percent drop in the company's profit for the third quarter, and announced it will reduce the number of stores expected to open in fiscal year 2009 from 21 to 15.
The company, which is traded on the NASDAQ under the symbol WFMI, reported its earnings late Tuesday. The stock was trading around $20 recently, a 13 percent plunge.
"The challenging economic environment appears to be negatively impacting our sales," John Mackey, CEO and co-founder of Whole Foods, said in a press release about the rough quarter. "This has led us to take a more conservative approach to our growth and business strategy over the short term."
The proposed 65,000 square-foot Whole Foods grocery is scheduled to open in late 2009 at the corner of University Avenue and Segoe Road, replacing the company's existing store at 3313 University Ave., which is roughly 33,000 square-feet.
Kate Klotz, a spokeswoman for the Midwest region of Whole Foods, initially said she did not believe the new Madison store would be affected by the company's decision.
"I'm fairly certain that the Madison store will not be one of the six that we have decided will not open," said Klotz.
However, in a follow-up email, Klotz stated she could not immediately confirm the store's fate.
"My leadership team ... will not have any answers about new store announcements and our region until next week," said Klotz.
Klotz said it was her understanding that Whole Foods was waiting on Joseph Freed & Associates, the Palatine, Ill.-based developers who own the property, to begin construction.
Tim Parks, a planner with the City of Madison's Planning and Development Department, said the city will issue building permits after Freed finalizes various documents pertaining to construction.
"As far as I know, Freed plans to begin construction towards the end of the month," said Parks. "We haven't heard anything different."
A representative from Joseph Freed & Associates was unavailable for comment.
After the close of trading on Tuesday, Whole Foods' CEO Mackey offered some hints on what shape the new stores may take.
"With hindsight, reflection, and some data points in front of us, we see that the really large stores are very powerful in limited markets and that smaller stores can also produce great returns for us. We believe that a store size of 35,000 to 50,000 square feet is more appropriate in most circumstances to maximize return on investment.
"We expect the majority of our stores to fall within that range going forward. We are also actively working to drive down the average development cost per square foot," Mackey said on a conference call with financial analysts, according to SeekingAlpha.com.
The new Whole Foods is part of Freed's "Phase II" development of the property, which, in addition to the grocery, is to include Hotel Indigo, an eight-story, 150-room boutique hotel. An 11-story condominium building with office and retail space that was part of the original plans for the property was scrapped late last year.
Freed bought the property in 2004 and originally planned to have a Whole Foods opened by the end of 2006.
Mike DeVries/The Capital Times
Whole Foods announced that a 30 percent drop in profit has prompted its decision to not open six new stores. The fate of the proposed new grocery on the corner of University Avenue and Segoe Road, whose lot is pictured, has not been confirmed.
