Flush with the positive reception of its new 58,000-square-foot Manhattan flagship at Columbus Circle, Whole Foods is opening stores in Greenwich Village on West Houston and in Union Square. Some of its competitors in the upscale groceries market, including Trader Joe's, are scouting locations as well.
Why is the 158-store chain expanding in Manhattan now? “Their store in Chelsea was their best store until they opened their second [Manhattan] store in Columbus Circle, and now that's the best, so they're two for two,” says Scott Van Winkle, an analyst at Adams, Harkness & Hill in Boston. Whole Foods has 11 outlets in the tri-state area.
Whole Foods registers sales of $800 per square foot while most grocers sell about $500 per square foot, according to Van Winkle. The company also is more profitable — up 3.59 percent over the past two months, compared with a 3.81 percent loss for local competitor Gristede's, according to Dow Jones data.
A Wall Street darling, Whole Foods Markets' stock has outperformed the Dow Jones food retailer and wholesaler index by nearly 340 percent over the past five years. Today, the Austin, Tex.-based firm's stock stands at $87, giving it a market cap of $5.3 billion. Local competitor Gristede's stock is hovering now at around 85 cents, with a market cap of $17 million, and its stock is under-performing the industry by an unappetizing negative 40 percent.
A number of factors may be contributing to Whole Foods' penetration in Manhattan. Hugh Boyd, a Montclair, N.J.-based architect who specializes in designing upscale food outlets, says that there's more available space now than a few years ago when national chains such as Gap Inc. were expanding. Additionally, landlords have a greater appreciation of the virtues of dealing with one big tenant rather than a number of small ones. Realtors also are realizing “that food is a destination,” Boyd says, and useful for pulling in foot traffic to nearby properties.
The flexibility of Whole Foods and other grocers to take locations traditionally considered less attractive for retail, such as a basement or a second floor, also makes them desirable tenants.