Whole Foods closing Colorado Springs store amid stiffer competition

February 9, 2017 Updated: February 10, 2017 at 11:18 am
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photo - Whole Foods has announced it will close it's store at First and Main in Colorado Springs. The store was still open for business Thursday, February 9, 2017. Photo by Mark Reis, The Gazette
Whole Foods has announced it will close it's store at First and Main in Colorado Springs. The store was still open for business Thursday, February 9, 2017. Photo by Mark Reis, The Gazette 

Whole Foods Market Inc. is closing its store at the First & Main Town Center on Colorado Springs' east side.

The store is one of nine outlets in seven states being shuttered by the Austin, Texas,-based Whole Foods, which this week reported its sixth straight quarter of falling sales at established locations.

Whole Foods, long known for healthier and higher-end products, has faced stiffer competition in recent years from Sprouts Farmers Market and other comparable stores, along with traditional supermarkets who have increased their organic and natural offerings.

The Whole Foods at First & Main, near Powers Boulevard and South Carefree Circle, will close April 9. A Whole Foods in Boulder also will close as part of the downsizing; the company also is closing two locations in California and one each in Illinois, New Mexico, Utah, Arizona and Georgia.

Whole Foods has a second location in Colorado Springs at the Chapel Hills East retail center on North Academy Boulevard. That store will remain open.

"As we work to position Whole Foods Market for long-term success, we have carefully evaluated our portfolio of stores to align with a more thoughtful growth strategy," company spokeswoman Betsy Harden said via email. "This was not a decision that was made lightly and we are working closely with all affected team members to find alternative positions at nearby stores where possible."

The Whole Foods at First & Main has about 75 employees, she said.

Dan Rodriguez, a commercial broker with the Springs office of national real estate firm CBRE, said Whole Foods had been a pioneer in offering organic and healthier foods, but no longer has the market to itself.

In the Pikes Peak region, Walmart, Safeway and King Soopers dominate, while Sprouts opened its second Springs location in 2016 and expects to open a third this year. Natural Grocers also has a pair of locations in the Springs, and Trader Joe's has a single store.

"In in the last few years, there are direct competitors that have risen, like Sprouts and Lucky's Market," Rodriguez said. "Even the traditional grocers and their product offerings in those categories have gotten a lot deeper."

Other competitive factors are at work, too, Rodriguez said.

Traditional grocers have expanded their shopping options; Walmart customers can order online, drive up to the store and have their items loaded into their cars, while King Soopers offers home delivery, too.

Whole Foods also has gained an unenviable reputation as being overly pricey, Rodriguez said; shoppers joke that you need a whole paycheck to shop at Whole Foods.

In recognition of that, the company has started to roll out its 365 by Whole Foods Market concept - smaller stores with many lower prices, Rodriguez said. The stores haven't yet made their way to Colorado.

Whole Foods opened at First & Main in 2008; it originally was a Wild Oats grocery, but was converted after Whole Foods acquired Wild Oats.

Fred Veitch, a vice president with First & Main developer Nor'wood Development Group of Colorado Springs, said several Whole Foods that are being closed previously had been Wild Oats locations. While Whole Foods has been a great tenant at First & Main, the store there never was fully converted from the Wild Oats brand, he said.

Nor'wood learned of Whole Foods' decision to close the location on Wednesday, and will begin working on a plan to find a replacement tenant, Veitch said.

First & Main, which extends along Powers from North Carefree Circle to Constitution Avenue, has grown into the area's largest retail center; it includes Super Target, J.C. Penney, Best Buy, Lowe's Home Improvement Warehouse and a Cinemark movie theater complex, along with dozens of local and chain restaurants and smaller retailers.

"We continue to have positive retail growth from everybody," Veitch said. "The center is doing really, really well."

In addition to closing the nine locations, Whole Foods plans to open only six new stores, including two relocations.

In releasing financial results Wednesday, the company noted it still has dozens of stores in the pipeline and that it will continue to grow, but that it will be more careful about signing new leases. The company added it no longer sees a potential for 1,200 locations, up from the roughly 470 it has in the United States, Canada and the United Kingdom.

As customers migrate to traditional supermarkets - which Whole Foods CEO John Mackey said have become a "good enough alternative" for some - the company said it will focus on its most loyal customers and getting them to spend more.

By convincing those "Whole Foodies" to add just one more item to their shopping baskets, Mackey said the company could significantly boost its sales.

To do that, the company announced a partnership with a data insights company that could help it better manage merchandising and pricing. Although Whole Foods has been trying to shake its "Whole Paycheck" image, Mackey noted that it doesn't want to compete in a "race to the bottom."

But Mackey said the company still needs to be careful about charging too much.

"Nobody wants to feel they're being cheated," he said, when asked by an analyst during a conference call whether Whole Foods' core customers care about price. Mackey added that Whole Foods doesn't have to be the cheapest, but there can't be "too big of a gap" where people feel the company is taking advantage of them.

In the meantime, Whole Foods has been cutting costs, including by closing its remaining kitchen commissaries where it made prepared foods. Those foods will now be provided by suppliers or made on site. Mackey said he doesn't expect to close too many more stores looking ahead, and believes the company has "cleaned up" its store base for the time being. Late last year, the company also got rid of its co-CEO structure, making Mackey the sole chief executive.

For the three months ended Jan. 15, Whole Foods said sales fell 2.4 percent at established locations. The company said the figure was also down for the current quarter, and it cut its sales and profit forecast for the year.

It earned $95 million, or 30 cents per share, for the period. Not including one-time items, it earned 39 cents per share, in line with expectations. Total revenue for its first fiscal quarter was $4.92 billion, short of the $4.98 billion expected, according to FactSet.

Whole Foods Market Inc. now expects sales at established locations to fall as much as 2.5 percent. It previously said it expected the figure to be flat to down 2 percent. It also lowered its earnings forecast to $1.33 per share or better.

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The Associated Press contributed to this story.

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Contact Rich Laden: 636-0228

Twitter: @richladen

Facebook: Rich Laden

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