Fresh & Wild, the owners of Whole Foods Market, admitted today that the organic supermarket has racked up pre-tax losses of £9.9m in its first year of UK operations. The Kensington store, which was the US chain’s first UK branch, opened last June just before the onset of the credit crunch – but as retail spending has started to feel the squeeze, its well-heeled customers increasingly seem to be trading down to slightly less expensive options instead. And it’s a bit hard to see what Whole Foods can do about it...
Whole Foods Market opened its doors amid a blaze of publicity last year: the three-storey supermarket, which apparently covers 80,000 square feet, seemed to be perfectly timed to tap into the growing demand for fresh, organic healthy produce (the shop employs more than 50 chefs to prepare the food in-store every day). And initial signs seemed promising. But not even the residents of Kensington and Chelsea are immune to the credit crunch, it seems. As all those bankers started worrying about where their next bonus was going to come from, they clearly decided that they couldn’t really justify that organic tofu, and started taking the 4x4 to Tesco instead.
At a time when budget retailers like Aldi and Lidl are thriving, it probably seems logical that a high-end business like this is feeling the pressure. However, it isn’t always the case that the most expensive retailers suffer during a slowdown – more often than not, their customers are less affected by the economic troubles and keep spending regardless, while the guys in the middle get squeezed out by the lower end. Even in the food retail market, Waitrose seems to be proving pretty resilient...
But with Whole Foods, it’s just a bit hard to see how it’s ever going to make much money. Apparently it employs more than 500 people in its Kensington store, while shelling out for three storeys of retail space in what is probably the most expensive part of London. With a cost line like that, it’s going to need huge sales to turn a profit – and the way the economy is looking, we just can’t see punters reverting to organic en masse any time soon.
CEO John Mackey (who’s under pressure after global profits slumped 33%) insists there’s long-term potential here and reckons the UK operation could break even by 2011. It's a lovely shop and we hope he's right - but frankly, we’ll believe it when we see it...
In today's bulletin:
Bank plays it safe despite further housing falls
Barclays surprises despite profit slump
Is a woman's place in the home?
City women lagging behind on pay
Whole lot of pain for Whole Foods