Edgewood Plaza's Fresh Market grocery store in Palo Alto will close by March 31, the company announced on Thursday.
The announcement comes as the renovated Edgewood Plaza Shopping Center at 2080 Channing Ave. and Embarcadero Road is filling up with shoppers and new retail stores. Fresh Market is considered the anchor store.
"After careful consideration of expected future cash flows, the long-term strategic importance of individual stores, and the anticipated timeline of store openings in California, the company has decided to close its operations in California, which include stores in Palo Alto, Santa Barbara and Laguna Hills, in order to focus on higher growth opportunities," the company told investors.
"Despite the improving results of these stores in California, the company concluded that the pace of organic store growth was going to be slower than anticipated and believes it can achieve more consistent financial results and a better return on its investments by continuing to grow in markets within or closer to its existing markets at this time," the company said.
The Edgewood store survived a previous round of cuts after Fresh Market announced that it would concentrate on growth in the eastern half of the United States over the next three years. The store opened to fanfare in June 2013 as the great hope for Edgewood's revival after the 2006 departure of Albertsons grocery store and a continuous decline into dereliction.
Developer Sand Hill Property restored the historic commercial Joseph Eichler buildings and has been filling them with popular retail stores, including a Starbucks, Orangetheory Fitness center, Supercuts and Chase Bank. House of Bagels, which formerly operated on University Avenue in downtown Palo Alto, recently relocated to Edgewood after being evicted due to redevelopment.
But Fresh Market's corporate office said that for fiscal 2014, operating losses and pre-opening related rent and other expenses attributable in California totaled approximately $4.8 million. As a result of the store closures, the company anticipates additional charges in fiscal 2015 of approximately $20 million to $26 million related to lease liabilities, asset disposals, severance and other costs associated with the closure of operations in California.
The stores will be closed to customers by March 31, and the company expects store closure activities to be completed in 2015, it said.
Edgewood developer John Tze could not immediately be reached for comment on what the closure might mean to Edgewood's viability. But some Duveneck/St. Francis neighborhood residents are already making phone calls to other small market operators to let them know about the opening.
"The neighborhood is hoping that the sudden, unexpected closure of Fresh Market is not a crushing blow to Edgewood Plaza, which has been blossoming. It's been a wonderful store to go to. Hopefully management can entice one of the local unique grocery stores in the South Bay to expand," resident Nancy Jamison wrote in an email to the Weekly Thursday afternoon.
Carla Carvalho echoed her concern.
"It's a somber day here in my neighborhood. It's a bummer for sure -- and a surprise. From our standpoint, this is a huge asset. It's a great place to meet people and to build a sense of community," she said.
Carvalho, a Realtor, said she fears the closure will affect businesses thinking of moving in when they see that the anchor store is pulling out. And sale of the single-family homes that are part of the development might also be affected, she said.
"If I'm a homebuyer, I'm gonna think twice about moving into a home next to a vacant warehouse," she said.
Fresh Market's closure is another example of the city's Planned Community (PC) ordinance, Jeff Levinsky said.
"I think this demonstrates yet again why it doesn't make sense to allow developers to claim grocery stores are public benefits for Planned Communities (PCs). Having a grocery store was one of the four public benefits of the Edgewood Plaza PC. Alma Plaza and College Terrace Center are two other PCs with grocery stores as public benefits, and I wouldn't bet those stores will succeed either," he said.
Outside Fresh Market on Thursday afternoon, a sandwich board announced that the store was closed for the rest of the day due to staff meetings.
Retailers had mixed concerns about the anchor store's closing.
"I don't think it will have that great of an impact," said Steve Stivala, owner of House of Bagels. "Maybe it's a good thing; maybe we could get someone a little more local. People here in the surrounding neighborhood are overwhelmingly supportive of a market. It's not that hard. If you give these people what they want, it's a winner."
Fresh Market moved to Edgewood at a time when the shopping center redevelopment was still underway. That made it hard for the developer to find a grocer willing to establish there, Stivala said. But things are different now.
"Now it's a vibrant center. Any retailer who knows the business will see this is a good place. It's picking up steam; it's got a lot of good things happening here," he said.
Jared Story, general manager at Orangetheory Fitness, was more concerned.
"When we first started here, we relied on the Fresh Market heavily for foot traffic. Customers found us through that store," he said.
Fresh Market also draws a lunch crowd from surrounding businesses along East Bayshore Road, and he fears the vacancy will reduce customers to the center, he said.
Stivala was at a loss to understand how the company could put so much money into opening the store and then walk away. He also could not fathom why the Fresh Market chain would leave when the center was just becoming vibrant, he said.
"Now you're gonna close? Let's give it six more months," he said.
Stivala, for one, remains committed to Edgewood.
"I'm gonna do what it takes to make it," he said.