Walmart to close Marketside stores next week

By Jessica Wohl

(Reuters) - Wal-Mart Stores Inc <WMT.N> will shut its four Marketside stores next week, abandoning the concept after three years as it works on opening other small shops.

Marketside marked Wal-Mart's attempt to give U.S. shoppers a quick place to buy prepared food such as roasted chicken and freshly baked bread for last-minute meals without the need for a trip to a larger grocery store or supercenter. The stores also carry produce, wine and other groceries.

The world's largest retailer opened its four Marketside stores in the Phoenix metropolitan area in 2008. A year later, it started to sell some Marketside branded food in other Walmart stores, and it will continue to do so.

The four Arizona stores -- in Chandler, Gilbert, Mesa and Tempe -- will close on October 21, a spokesman said on Friday.

Wal-Mart is not the first U.S. grocer to abandon the concept of a small shop selling prepared food to consumers looking for quick meal solutions. Supervalu Inc <SVU.N> shut down a similar upscale concept store in Chicago, Urban Fresh, in 2009 after just over a year.

Now, Wal-Mart is banking on another small-store concept, more aligned with its roots, as a potential growth vehicle in rural and urban locations where its larger shops would not work.

Wal-Mart's Marketside stores, at roughly 16,000 square feet, are about the same size as the Walmart Express test format the company launched in June.

So far, Wal-Mart is pleased with the five Walmart Express stores in Arkansas, North Carolina and Chicago. It plans to have 11 such stores by the end of the year.

"We continue to believe it will take multiple years for Walmart to perfect this concept, if ever," said Avondale Partners analyst Mark Montagna.

The analyst said he does not expect the expansion of Walmart Express to hurt one of its strongest low-priced competitors, Dollar General Corp <DG.N>, which happens to be making some of its small stores a little bigger.

Walmart Express, still in its infancy, recently came under new leadership.

Anthony Hucker, who had been a Wal-Mart vice president overseeing Walmart Express, left to join Ahold's <AHLN.AS> Giant Landover grocery division in September.

Debra Layton, senior vice president for small formats, layouts and space productivity, is now in charge of Walmart Express.

SHRINKING STORE SIZES

Walmart Express stores, which range from about 10,000 square feet to 15,000 square feet, feel more like traditional Walmart stores than the Marketside shops. Walmart Express stores are stocked with groceries and some housewares. Pharmacies are included in some of the locations.

Earlier this week, Wal-Mart said it would ramp up openings of its Neighborhood Market stores, which at about 42,000 square feet are much larger than Marketside or Walmart Express stores but much smaller than Walmart supercenters.

The first Neighborhood Market opened in 1998. There are about 185 such stores now. Wal-Mart plans to open 80 to 100 small and medium-format stores in its next fiscal year. Most will be Neighborhood Markets. This year, it plans to open just 25 to 30 small and medium shops.

The majority of Wal-Mart's new U.S. stores -- up to 120 this year and up to 135 in fiscal 2013 -- will continue to be supercenters.

Even those are getting a bit smaller.

New supercenters are set to be roughly 90,000 to 120,000 square feet. Walmart supercenters used to average about 185,000 square feet.

(Reporting by Jessica Wohl in Chicago; editing by John Wallace, Gary Hill)