CHANDLER, Ariz. — Bashas' here has shuttered five stores — including its prototype Ike's Farmer's Market location — and eliminated 350 positions as it struggles with a difficult operating environment in Arizona, the chain's president told SN last week.
“We have to lower our costs to continue to compete as effectively as we can,” said Mike Proulx, Bashas' president. “We're just being prudent operators.”
The privately owned company, which operates about 160 locations, mostly in Arizona, is closely evaluating the viability of all of its stores as it faces challenges both from the weak economy and from an influx of new competition.
A local housing slump has applied the brakes on the state's previous breakneck growth pace, while at the same time Bashas' has faced the rapid expansion of Tesco's Fresh & Easy format, which has opened about 30 stores in the market, and the debut of Wal-Mart's experimental Marketside stores. Wal-Mart opened three of the small-format Marketside stores in the Phoenix area last year and has a fourth site planned.
In addition, the region hosts Kroger — under the Fry's banner — plus several Safeway and Albertsons LLC locations, and specialty chains like Whole Foods Market and Sprouts Farmers Market.
“We have everyone here, and the competition for the consumer's dollar is just escalating,” Proulx said.
He also said Bashas' has suffered from its long-running dispute with United Food and Commercial Workers Local 99, which has been running a negative publicity campaign against the retailer.
The 350 job cuts will come from “all areas of the company,” Proulx explained, including stores, the company's training center, its headquarters and its distribution center. The cuts follow a previous cutback last year in which the chain eliminated more than 100 jobs and ended its home-delivery operation. The most recent reductions represent about 2.7% of the company's total workforce of 13,000.
He said Bashas' is still planning new openings — two new stores are planned for this spring, and another for the fall — although it is carefully eying future expansion plans to determine the viability of other planned sites.
“Arizona went from first- or second-fastest growth in the nation, to practically no growth,” he said. “Because of that, we are analyzing all of the sites we have, including sites we have planned that we haven't developed yet.”
And although the company is shuttering Ike's Farmer's Market, the fresh and organic specialty store it opened in 2007 near Tucson in Oro Valley, Ariz., Proulx said the banner could still reappear in other locations.
“We're pleased with the store, and we're pleased with the offering we have there, but the location was not right,” he said. “Contrary to all our research and studies, it just wasn't the right place for that store.”
The 43,000-square-foot Ike's — named after one of the chain's co-founders — was housed in a former Bashas' supermarket that had been refitted with new fixtures, a lounge area and an expanded fresh offering.
The other stores to be closed include two traditional Bashas' locations in the Phoenix area and two of the chain's Hispanic-oriented Food City stores, one each in Phoenix and San Luis, Ariz., near Yuma. None of the chain's upscale AJ's stores are slated for closure.
Rick Murphy, a senior vice president in the Phoenix office of real estate firm CB Richard Ellis, called Bashas' an “extremely well-run company,” but said retail development in the region as a whole had been overdone during the heated expansion of the residential real estate market there.
“There are a lot of retail projects that should not have been built,” he said. “We'll see a lot more of those going back to the bank.”
On the positive side, he noted that rents should begin to fall for retailers in the area.
Dave Cheatham, executive vice president at the Phoenix office of real estate firm Staubach Retail, said the slowdown will be healthy overall for the market.
“If you are raising your housing prices 55% in two years, there has to be a correction,” he said, noting that businesses cutting back on their expenses are doing the right thing. “It's a good, healthy business practice, and necessary during a business contraction.”