(Sept. 5) BOULDER, Colo. — Fresh produce is playing a key role in a major natural foods retailer’s expansion plans.

Wild Oats Markets Inc., Boulder, plans to open 58 stores during the next three years: 13 in 2002, 20 in 2004 and 25 in 2005.

The stores will focus on produce by moving more fresh fruit and vegetables to the front of the stores.

“Our customers like fresh produce, and we understand the importance of fresh produce in the business strategy,” said Doug Ranno, Wild Oats Markets’ vice president of produce and floral. “We will continue to make that an important part of our business.”

Wild Oats Markets Sept. 4 announced it had completed the sale of 4.45 million shares of its common stock priced at $11.50 a piece. Most of the long-awaited stock offering — $48.3 million — will be used to open stores and remodel others.

A major investment firm Aug. 30 cut its Wild Oats Markets rating from “neutral” to “sell.” A Merrill Lynch analyst cited dilution from the equity offering as well as the retailer’s large exposure to options expenses as reasons for the stock’s decline. Wild Oats Markets’ stock increased after the expansion announcement but traded down sharply following the downgrade that occurred two days later.

Wild Oats Markets’ Nasdaq stock closed Sept. 5 at $11.71.

SMART MOVE

Mark Mulcahy, organic produce industry consultant and president of Organic Options, Glen Ellen, Calif., said the expansion will be a smart move for the organic and retailing industries.

“They’re seeing the writing on the wall,” he said. “Produce departments are a store’s calling card and are the reason people choose a store. In recent studies, fresh produce accounts for 40% of the entire organic foods market. People can find mediocre produce anywhere.”

Stores recently opened in California communities of Long Beach and Irvine emphasize fresh produce.

“Produce is the primary item people think of when it comes to organic,” said Sonja Tuitele, Wild Oats Markets’ director of corporate communications.

GATEWAY ITEM

“While we have organic products throughout the store, we really see produce as a gateway item to introduce customers to more of our natural organic offerings. It’s what we’re known for.”

The store expansions, Tuitele said, are a part of the company’s growth strategy that will provide more customer-shopping options.

“It makes more sense operationally, when you look at logistics and distribution,” Tuitele said. “It will have more benefits by having a larger number of stores in a specific market. We also see a lot of opportunity to go into untapped markets down the road.”

The stock downgrade could be a “kind of a wait and see thing,” Mulcahy said.

An aggressive acquisition streak during the late 1990s put the retailer in debt. Mulcahy said Wild Oats Markets’ new chief executive officer, Perry Odak, is leading the company in a direction that should help the company’s bottom line and the organic retailing industry.

Wild Oats Markets operates 101 stores in 23 states, primarily in the Southwest. The stores offer more than 175 fresh organic produce items.