Whole Foods Market CEO John Mackey insists the UK operations will break even by 2011 – despite reporting pre-tax operating losses of $18.4m (£9.4m) on its London-based stores and a 31% reduction in its global third-quarter profits amid the continuing credit crunch. 

The US-based organic retailer defied convention when it opened a 80,000 sq ft flagship site, on four floors, at the former Barkers department store in South Kensington last June. Added to the five former Fresh & Wilds it acquired in 2004, it was seen by analysts as a staging post for an ambitious expansion into Europe. 

But Mackey said the main opportunity in Europe remained the UK. 

“We initially lost money when we entered Canada as well. We believe the long-term growth in the UK is much greater than Canada. We are carefully evaluating all aspects of our operations in the UK, with the intent of improving our results over the short term and delivering strong results over the long term,” said Mackey, adding that he expected to reduce pre-tax operating losses to $13m (£6.7m) in financial year 2009, $7m (£3.6m) in 2010, approaching break-even in 2011.

However, while Whole Foods recently identified Birmingham as the first of several provincial sites for expansion (The Grocer, 22 March, p8), UK-based retailers and property experts remain highly sceptical about the future profitability of the flagship site. 

“In my view it should be half the size. This would have intensified the shopping experience and addressed at least part of the waste problem,” said the CEO of a rival premium multiple retailer. 

“Large stores rely on shoppers taking away a large basket or trolley of goods by car and its position works against this.”

A property expert added that high rents associated with its location were not to blame for the losses. 

“We aren’t aware of any other businesses struggling on Kensington High Street, so rent is not a factor,” he said. “It’s more likely to be the company’s offer. Organic has stalled as more people are shopping at the discounters.”

Jokingly referred to in the US as The Whole Paycheck, Whole Foods Market also saw a 31% decline in third- quarter earnings, from $49.1m to $34m, despite sales growth of 22% due to increased competition in its domestic market including Wal-Mart. 

Suppliers in the UK were keen to offer support. Christopher West of salmon & trout supplier Hebridean Smokehouse told The Grocer: “We have an extremely good relationship. Whole Foods Market is easy to deal with, very professional and treats us fairly in terms of pricing. I’ve seen nothing to suggest it is not doing well. We will certainly be continuing our relationship.”

Yeo Valley Organics marketing director Ben Cull also said Whole Foods had been a pleasure to work with, adding: “Luck and timing play a big part in success in business. Launching a big store has encouraged people to put the spotlight on the company, and it was a bold move, but it caught the tail end of the market, just as the credit crunch was starting to move in. 

“Had it launched two years earlier it would have [fared] better.”