When Hy-Vee opened in New Hope and Oakdale in 2015, Chief Executive Randy Edeker said he expected to open four Twin Cities stores each year through 2025.
The company is still on plan with the opening of its eighth metro-area store in Shakopee on Tuesday. But after the ninth opens in Robbinsdale next fall, Hy-Vee will tap the brakes.
"We've slowed the growth of large stores in the Twin Cities," Edeker now says. "If you look at the last month and a half across the U.S., Walmart announced very few stores, Kroger is not building any, and Trader Joe's is slowing way down. I just want to take a little pause while we figure it out."
Last week, Des Moines-based Hy-Vee announced a delay in building a new distribution center in Austin, Minn., and said it was re-evaluating the size of its stores. Edeker said a new focus on alternative formats could mean smaller stores ranging from 12,000 to 50,000 square feet, a smaller footprint than the 90,000- to 105,000-square-foot stores it has been opening here.
"With the slowdown of big-store growth, we don't need a distribution center up here right now," he said.
Even though stores in Maple Grove, Columbia Heights, Farmington and Chaska may be delayed, Edeker said they are still on the books.
"We're not backing off of any of the stores we've already announced," he said. "We just want to make sure we're building the right thing for the consumers of the future."
Amid the caution, Hy-Vee's capital expenditure budget is the largest in its history, Edeker said. It is building a 240,000-square-foot commissary in Ankeny, Iowa, a smaller produce facility in Chariton, Iowa, for cutting fruits and veggies, and three fulfillment centers for online orders, including one in the Twin Cities.
Even Hy-Vee's new Shakopee store, which has been in the works for 18 months, has undergone some last-minute changes. Originally, it was going to include a juice and smoothie station and produce station as some of its other Twin Cities' stores do. But executives found customers weren't using them as much as hoped and so they were not built in Shakopee.
"We took out those departments to create a larger seating space for our dining area," Edeker said. It's the first time that Hy-Vee instead allotted more space for eating, studying or having a cup of coffee.
"We've gotten to 86 years by constantly following the customers' lifestyles and trying to adapt and change with them," Edeker said.
Phil Lempert, a food trend expert at Supermarketguru.com, said adding seats is a smart thing for Hy-Vee to do. "They're wanting to be the hub of the community," he said. "Half of all food sales are in restaurants, so with more seating, Hy-Vee is building a stronger food relationship with shoppers. They're becoming 'grocerants'."
Edeker attributes the ability to make such changes to being a privately held company with no shareholders other than the 85,000 workers in the employee-owned company.
It also allows Hy-Vee, which has 246 locations, to add departments that many analysts would say are risky, such as an F & F clothing department that is similar to H & M. "There's not another retailer in the U.S. that's selling clothing in a grocery store," Edeker said.
As for the Basin cosmetics department that has been new since the beginning of the year, Edeker said they have been "a definite big win. It's a way of keeping customers wanting to come in for products they don't find in other places."
The latest partnership? Orangetheory Fitness, which has a location adjacent to the Shakopee store, also opens Tuesday. Hy-Vee plans to offer Orangetheory's customers information about nutrition, food allergies and meals on the go.
The new store also has enhanced baby and pet departments, including lines such as Honest Baby by Jessica Alba and Blue Buffalo pet food. "They're not earth-shattering unless you're a mom or a pet owner," Edeker said. "Grocery stores weren't allowed to have those lines before."
Analyst Lempert said taking a pause is smart business. "It's easy to build store after store, but it's also important to say let's watch what Amazon, Aldi and Lidl are doing," he said.