Smaller Wild Oats Locations Could Be Reformatted

AUSTIN, Texas — Whole Foods Market could turn some of the smaller Wild Oats stores it is planning to acquire into grab-and-go food-service locations with limited grocery offerings, according to some observers.

In announcing the planned acquisition, Whole Foods, based here, said it would close an unspecified number of Wild Oats locations and convert the rest to the Whole Foods banner. Some analysts have estimated up to 30 Wild Oats stores could be closed, but others said the company may be able to get by with very few closures by remerchandising the acquired locations.

“The determination about which stores to close will partly revolve around whether Whole Foods tries to make these stores any different,” said Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va. “Instead of having them be like a small but full grocery store, they could make them into limited-assortment, ‘what's for dinner tonight,’ highly food-service focused stores. Whole Foods now has such a highly developed food-service offering, they could run smaller stores as fill-in locations for the lunch crowd and the dinner solutions crowd. If they do that, there may be fewer store closings than you might expect.”

He pointed out that in Cambridge, Mass., Whole Foods operates a small store in close proximity to a larger store to capture sales from the individual neighborhoods.

In some markets, however, such as Louisville, Ky., where Whole Foods and Wild Oats operate right across the street from each other, the Wild Oats store is likely to close, he said. Portland, Ore., also reportedly has a Whole Foods and a Wild Oats in very close proximity.

Data from Metro Market Studies, Tucson, Ariz., indicate that there are 24 markets where both chains have stores, and another 18 markets where Wild Oats operates but Whole Foods does not. (See tables below.)

Tom Mathews, vice president in the Denver office of real estate firm CB Richard Ellis, said that in the Denver area the two chains tend to be relatively well-spaced.

“There are a couple of smaller stores that could be closed,” he said, but he also pointed out that Whole Foods could choose to remerchandise many of the smaller Wild Oats stores. “Whole Foods may be able to take a 20,000-square-foot location, and they may be able to come up with a smaller Whole Foods concept.”

He said that while Whole Foods typically has “bigger, newer” locations, Wild Oats also has some smaller, strategically located sites in urban areas “that are tough to get into.”

He cited one area in southeast Denver where a Wild Oats and two Whole Foods stores are located within about two miles of each other, but he expects that all three will remain open.

In other markets, too, the store locations of the two chains are often complementary. In both Southern California and Florida, for example, each chain operates a large number of stores, but many of those are in separate but adjacent markets.

Wolf said Whole Foods could consider selling off the Henry's Farmer's Market banner in Southern California, a Wild Oats banner that is more of an old-fashioned, small-format natural food store.

“They have a different brand name and a different market position, and there is some thought that the Henry's stores might be divested, maybe to private equity, and someone could run them as Henry's,” he said.

Markets With Both Whole Foods and Wild Oats

Markets With Wild Oats But No Whole Foods