Natural Foods Merchandiser
Whole Foods Market opens smaller stores to go big

Whole Foods Market opens smaller stores to go big

Whole Foods Market thinks small in order to become a bigger fixture in the U.S. natural foods retail landscape. Its latest earnings show how the strategy is paying off, and that independent retailers should be prepared to compete.

Whole Foods Market's 329-store count is about to get bigger due to its success in smaller markets. The natural chain is set to open 25 more stores by the end of this year.

In its third quarter financial results ended July 1, Whole Foods reported that sales increased 14 percent to $2.7 billion. During this time, the company opened a record nine new stores, including a store relocation in the United Kingdom.

"In an economic environment that is proving to be difficult for many retailers, we are thriving," said Walter Robb, co-chief executive officer.

With Whole Foods' increasing ubiquity in the U.S., it's hard to believe the retailer was founded in 1980. Over the long-term, the company estimates its U.S. market opportunity at 1,000 stores.

Supermarket News reports that during a recent call with financial analysts, Executive Vice President Jim Sud said the company has been surprised "by how well we fit into some of the smaller markets we've entered.

"That stems from the Wild Oats acquisition, where we acquired stores in smaller markets that we had not previously focused on. That gave us the confidence to look at these smaller markets, and we've been very pleased with the reception we've gotten."

But moving into smaller markets means Whole Foods may become an independent natural retailer's next biggest competition. Where is Whole Foods headed next? Click to the next page to find out.

Where is Whole Foods expanding next?

Here's where Whole Foods has currently signed a lease and intends to open in fiscal year 2014 and beyond:

  • Palm Desert, Calif.
  • Pompano Beach, Fla.
  • Park Ridge, Ill.
  • Wichita, Kan.
  • Boston, Mass.
  • Columbia, Md.
  • Kansas City, Mo.
  • Lincoln, Neb.
  • Parsippany, N.J.
  • Wynnewood, Pa.
  • Dallas, Texas
  • Houston, Texas

In February, newhope360 reported on Whole Foods first quarter earnings, predicting that the chain would continue to find success with its smaller stores in secondary markets

Read: 5 takeaways from Whole Foods Market's first-quarter earnings report

"While sales per square foot may not be as high as in the more densely populated markets, the economic case is compelling because rent is significantly less; and with the smaller size, our capital spend is less as well," Robb said.

Whole Foods has operated 21 smaller stores for six months, each at 38,000 square feet. Its traditional stores range from 50,000 to 70,000 square feet. The smaller stores' average weekly sales are $575,000, which translates to $786 in sales per square foot and generates a contribution margin of just under six percent. 

"We expect these outstanding results, combined with our lower average capital investment per store, will drive strong returns over time," said Robb during the company's most recent investor call.

Are you an independent natural retailer worried about your bottom line if Whole Foods comes to town? Thrive just as much as your competition with these tips.

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