Whole Foods scales back on Ward Village plan

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What was to have been Whole Foods Market's flagship store at Ward has now been scaled back to half its original size.

Citing a difficult economic environment and low consumer confidence, the Texas-based natural foods retailer said it is scaling down to a 35,000-square-feet store at Ward instead of 67,000 square feet as originally planned.

The Ward Whole Foods will occupy a single floor, rather than both floors of a two-level, retail space being constructed by General Growth Properties.

Three other Whole Foods stores are still being developed as announced in Hawaii, including a store at Kahala Mall to open in September, along with a store in Kailua and on Maui.

With the readjustment in size, Whole Foods' largest store is now planned for Kailua, at 40,000 square feet, with an anticipated opening of 2010.

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Whole Foods Market said this week that it is scaling back its plans for its flagship store at Ward Village Shops as part of an adjustment to today's economic environment.

Whole Foods Hawaii openings » Kahala Mall, 28,670 sq. ft., opening Sept. 10 » Maui Mall, Kahului, 26,366 sq. ft., opening late 2009 or early 2010 » Ward Villages, 35,000 sq. ft., opening 2010 (1st quarter) » Kailua, 40,000 sq. ft., opening 2010 Source: Whole Foods Market

Instead of opening a two-level, 67,000-square-foot store, Whole Foods will occupy 35,000 square feet on the bottom floor at Ward Village Shops.

The store, which has faced numerous delays and was supposed to be the first Whole Foods to open in Hawaii, is now scheduled to open in 2010.

General Growth Properties is building the store on a 6-acre site as part of a mixed-use project that was also to include a multi-level parking garage, nearly 100,000 square feet of additional retail space, and a 17-story apartment building. Pier 1 Imports is the only original tenant still at the site.

Whole Foods Market is under construction next to the Hokua luxury high-rise condominium along the Auahi Street side.

Jan Yokota, General Growth's vice president of development in Hawaii, said it is now seeking retail tenants for the second floor of the store planned for Whole Foods, and that it could be leased to one or several tenants.

"We do believe in the future of Hawaii for Whole Foods Market and are committed to our four stores in development." Michael Besancon President of Whole Foods' southern Pacific region division

Yokota also said that both the apartment building, which had to be redesigned because of native Hawaiian remains, or iwi, found there, and retail space are now on hold for a future phase.

The $150 million project was stalled several times when iwi were first found at the construction site two years ago, and ballooned from 11 sets to more than 60.

Michael Besancon, president of Whole Foods' southern Pacific region, said in an e-mail that the reduction is due to the macro-economic environment but that the company was still moving forward on its three other stores planned for Hawaii.

A career fair was held in July for Kahala Mall's Whole Foods Market, which is nearing completion for its September opening.

Another Whole Foods on Maui is targeted for a late 2009 or early 2010 opening, while Kailua is also on track for late 2010, according to Besancon.

"We do believe in the future of Hawaii for Whole Foods Market and are committed to our four stores in development," said Besancon.

He added that no iwi have been found at the Kailua construction site where Whole Foods is planned, so he does not foresee any delays.

Three sets of iwi were discovered beneath the construction site of First Hawaiian Bank, which is behind McKenna's Ford dealership and adjacent to the Whole Foods Market site in Kailua.

In reporting its third-quarter results, Whole Foods also announced a more conservative growth strategy in the short-term, citing the lowest consumer confidence in more than a decade.

John Mackey, Whole Foods' chairman and CEO, called today's economic environment "the most challenging I have experienced in my 30 years in retail."

Whole Foods is reducing the number of stores expected to open in fiscal year 2009 to 15 instead of its prior goal of 25 to 30, and has cut all discretionary expenditure budgets not related to new stores by 50 percent.

The Texas-based natural foods retailer is also focusing on the right store size for each market, and has since reduced eight leases by an average of 9,000 square feet each.

Whereas Whole Foods in past years pushed for bigger stores - such as its 80,000-square-foot store in Austin, Texas - Mackey said it will now focus on stores between 35,000 to 50,000 square feet going forward.

Whole Foods is also working to drive down the average development cost per foot, and is suspending its quarterly cash dividend.

The company continues to select additional Hawaii suppliers, which now include Hamakua Mushrooms on the Big Island and Ho Farms on the North Shore.