Wild Oats Closing Underperforming Stores

BOULDER, Colo.--After extensively reviewing the finances of its retail portfolio, Wild Oats Markets Inc. (NASDAQ:OATS) decided to shut down eight underperforming stores, including all five Henry's Markets locations in the Phoenix metropolitan area and three Wild Oats stores located in Omaha, Neb.; Fort Collins, Colo.; and West Jordan, Utah. The store closures will be effective Dec. 16, but there is no word on how many jobs will be lost. Wild Oats management was not available for comment.

The company stated the stores were in poor selling locations, particularly the tough retail environment in the Phoenix area, where a Henry's store under construction will no longer open. "We believe that the Phoenix stores were not performing at Henry's typically strong levels because of the fiercely competitive nature of the Phoenix food retail market, and the fact that Henry's was a new entrant to Phoenix two years ago," said Gregory Mays, chairman and chief executive officer (CEO) of Wild Oats, in a statement. Instead, he said, the Henrys stores will focus on growth in California. "With a sophisticated real estate model in place for our Wild Oats stores and a focus for Henry's growth in Southern California, we intend to continue to invest to grow our brand and our business, including reinvestment in existing stores," Mays said. "We are building on a strong foundation, and our focus will be to grow sales in existing stores while using our improved real estate model to select high-potential sites for new stores, like those opened so far in 2006."

The company expects to levy a $25.5 million restructuring charge in the fourth quarter, covering asset impairment, severances and lease-related liabilities, and will also pay incremental operational costs of about $1.7 million in conjunction with the closures. However, the company intends to re-invest the savings realized from the store closure into its existing store base to drive higher sales performance through various marketing, merchandising and operational initiatives.

Despite the end of Henry's in the Phoenix area, the company opened two Henry's stores in Southern California during 4Q and will open two more before year's end. It has also initiated 19 new Wild Oats and Henry's stores, which are scheduled to open during 4Q this year, in 2007 and into 2008.