Business

Wal-Mart plans small urban stores

NEW YORK — Wal-Mart Stores is planning an aggressive push into urban markets with a new small format that's a fraction of the size of its supercenters.

The expansion, expected to be spelled out next month at the retailer's meeting with analysts at its headquarters in Bentonville, Ark., is aimed to pump up sluggish U.S. sales.

Real estate executives said that over this past summer, the world's largest retailer has been scouring for small locations, around 20,000 square feet, in urban areas including New York City, San Francisco and other cities. That size is larger than a typical drugstore but smaller than a supermarket.

"I see this as a smart move, instead of coming into a market as a 900-pound gorilla," said Faith Consolo, chairman of real estate firm Prudential Douglas Elliman's retail leasing division. She noted that Wal-Mart has been talking to landlords and brokers.

"They're on an aggressive roll," she added. "This is a creative time. Everyone is thinking out of the box."

She noted that in New York City, Wal-Mart has been looking in Queens and the lower part of Manhattan.

Since 2008, Wal-Mart has been testing smaller stores called Marketside. They now total four and average 15,000 square feet. The format focuses on fresh food. And the discounter now has almost 200 Neighborhood Market by Walmart stores, which offer a mix of fresh food, pharmacy, beauty, stationery and pet supplies and are about 42,000 square feet.

Wal-Mart has been shrinking its supercenters, which carry a wide assortment of food and general merchandise, to about 150,000 square feet from 195,000 square feet. But the company has maintained that it plans to use smaller formats in urban markets.

In a note to investors Monday, Brian Sozzi, analyst with Wall Street Strategies, said he believes the new 20,000-square-foot stores would likely fuse the Marketside and Neighborhood Markets formats.

"Wal-Mart needs to have a store concept that brings in customers more than once every two weeks when paychecks are distributed," he wrote.

Wal-Mart spokesman Steven Restivo said Monday that "while we have not shared an exact size of the small format ... we continue to evaluate a wide range of stores sizes across the country and will consider any format that puts us closer to our customers."

Bill Simon, the new president and CEO of Wal-Mart's U.S. business, told investors last week at a Goldman Sachs retail conference that "we will have a healthy mix of supercenters and small formats, including our grocery format, Neighborhood Market and smaller formats."

Wal-Mart, which now has more than 4,000 stores in the U.S., has hit a wall in the U.S. The company just reported its fifth straight quarterly decline in revenue at stores open at least a year.

Wal-Mart benefited during the recession as affluent shoppers traded down to cheaper stores. But stubbornly high unemployment and tight credit are still squeezing its main U.S. customers, lower-income workers who are having even more trouble stretching dollars to the next payday.

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