(Feb. 13, 1:40 p.m.) Last February, Whole Foods Market Inc. was set to open an unprecedented number of stores in the company’s 20-plus years.

The Austin, Texas-based retailer had recently completed the purchase of its largest rival, had 89 stores in development and was planning to enter 15 new markets.

What a difference a year makes. Whole Foods recently announced plans to scale back its store openings to less than 70, and the retailer has paid $5 million to get out of 13 leases.

It is not alone.

As Whole Foods and other retailers face the toughest economy in a generation, new stores have been cancelled and remodels delayed.

Tough 2009

This year could be difficult for grocery retailers, despite Americans choosing to spend less money at restaurants in favor of home-cooked meals.

“Look for a lot of store closures,” said David Livingston, a Pewaukee, Wis.-based retail analyst. “It’s already happening with A&P, Sweetbay, Albertsons and Supervalu. They are starting with just a handful. Look for them to add to the list as things get worse.”

In late January, Matthews, N.C.-based Harris Teeter Inc. became the latest of many retailers to announce a scaled-back outlook for 2009’s store openings. According to a filing by its parent company, Charlotte, N.C.-based Ruddick Corp., the retailer cut its budget from $245 million for 19 new stores and eight major remodels to $212 million for 16 new stores and three remodels.

Sweetbay, owned by Brussels, Belgium-based Delhaize Group, announced plans to close seven stores in Florida in mid-January.

Emphasis on productivity

Retailers are going to make sure they’re getting maximum dollars per square foot, said Jim Hertel, managing partner of retail consultancy Willard Bishop Inc., Barrington, Ill.

“Productivity is paramount,” Hertel said. “Retailers are looking for much better utilization of selling space.”

That also could mean cutbacks in work force.

Chandler, Ariz.-based Bashas Family of Stores recently announced plans to trim about 3% of its work force — 350 workers — just months after it laid off more than 200.

Stores that have hung their hat on premium offerings could suffer, Hertel said.

“Some of the retailers who had been differentiating on the fresh departments like meat and produce are suffering because they suffer from high-price images,” he said.

Analysis of 2008 unit sales released Feb. 3 by The Nielsen Co., New York, show Americans increasingly turning to supercenters for their grocery purchases.

Nielsen’s research showed supermarkets had a 1% increase in unit sales — the only retail channel to post a positive growth in 2008.

Club stores also showed significant gains in fresh produce sales.

Don’t discount the discounters

The current economy could give rise to more deep-discount stores like Batavia, Ill.-based Aldi Inc., which entered the Florida market in 2008 and is building a new distribution center in north Texas for a planned entry to that market in 2010.

“Aldi is continuing to add stores at a good clip,” Livingston said. “They are taking advantage of a down real estate market and the high prices of their competitors.”

In fact, Hertel said same store sales at Aldi and Sav-A-Lot, another extreme discounter, are seeing comparable store openings at 10%.

“Wal-Mart, Kroger and the limited assortment retailers seem to be more than holding their own and in fact may be benefiting,” he said.

Sprouts Farmers Market, a natural foods store that pegs its sales on deep discounts in the produce department, is growing faster than it expected. The Phoenix-based chain has opened 31 stores in the past six years, said Doug Sanders, president and chief executive officer.

“Our original goal was to get to 50 stores by 2010,” he said. “Our new goal is 100 stores by the end of 2013.”

Williamsville, N.Y.-based Tops Friendly Markets also is continuing with its plans to expand and improve, said communications manager Katie McKenna. The company plans to spend $150 million building seven to 10 stores and renovating all of its 76 stores in the next five years.

"We feel that it is an important part of our plan as a locally operated company,” McKenna said.

The bright side is overall food sales are reasonably strong, Hertel said.

“But supermarkets need to be sharp pricers and merchants to capture their fair share and more,” he said. “Net, we’ll see a bigger spread between top and bottom performers in food retail.”

Retail grocers pull back on growth plans
Boulder, Colo.-based Sunflower Farmers Market opened its first Austin, Texas, store Feb. 11 under the Newflower Farmers Market banner. Chief executive officer Mike Gilliand says the natural foods store continues to grow thanks to an increased awareness of the category, along with shoppers looking for good deals, especially on produce.