Wal-Mart to Break Ground on Small Stores Next Week in Arkansas

Wal-Mart Stores Inc. (WMT) will next week start building its first Express stores, a format less than a tenth the size of an average supercenter, according to building permits obtained by Bloomberg News.

The world’s largest retailer will begin construction March 16 on a 14,400-square-foot store in Gentry, Arkansas, a town of 3,158 about 20 miles (32 kilometers) southwest of the company’s Bentonville headquarters, according to the permits.

While Wal-Mart has kept details of the new stores a closely guarded secret, Steve Restivo, a company spokesman, confirmed the location of the store openings and the timing in an e-mail. Work on similar stores in nearby Prairie Grove and Gravette will also start over the next two weeks, said town officials. The new stores will feature a pharmacy and groceries section.

“Wal-Mart’s U.S. store fleet is designed for yesterday’s retail wars,” Craig Johnson, president of Customer Growth Partners in New Canaan, Connecticut, said in an interview. “If they want to capture their rightful share of today’s shopping trips they have to have a smaller format. God bless supercenters, but they are not designed to get in and out of within five minutes.”

Chief Executive Officer Mike Duke is seeking new avenues for growth in the U.S. as comparable-store sales in Wal-Mart’s namesake stores have fallen for seven straight quarters. The retailer plans to open as many as 40 smaller units this year in rural and urban areas, and executives said last month that the first Express store would open as early as May.

‘Thousands of Opportunities’

U.S. chief Bill Simon has said that “there are hundreds, if not thousands of opportunities in the U.S.” for stores smaller than the retailer’s supercenters, which accounted for 76 percent of Wal-Mart’s U.S. locations as of Jan. 31.

The Express stores, concrete square boxes with metal roofs, will cost $1.2 million to build and sit on lots just under 5 acres, according to building permits filed in Gentry and Prairie Grove, which has a population of 4,380. The stores will have 75 parking spaces, a pharmacy and three or four checkout counters, said Jackie Baker, Prairie Grove’s building and planning director.

Wal-Mart supercenters average 185,000 square feet with about 142,000 items, according to the company website. Supercenters typically have as many as 800 parking spaces, according to research from UBS AG.

Dozen Aisles

Sections for fresh produce, refrigerated foods and frozen items will go down one side and along the back of the Express store, Baker said in an interview. The store will have about a dozen aisles, according to Gentry city superintendent David McNair.

It’s not clear from the planning materials how much of the product assortment will be groceries compared with general merchandise. Groceries accounted for 51 percent of Wal-Mart’s $258 billion in sales in the U.S. in fiscal 2010, according to company filings.

McNair said that when he first saw the layout earlier this year, Wal-Mart’s sponsorship of the project was not disclosed, with the plans calling the project simply a “Retail Store.”

“I only learned two weeks ago that it was Wal-Mart,” McNair said in an interview. “People said it may be a Target, or Wal-Mart, or Walgreen’s. Everyone had their own pet theory.”

Wal-Mart has tried smaller stores before. In 1998, the company launched Neighborhood Market, a 42,000-square-foot food- and-drugstore combination that did not deliver the return on investment provided by its supercenters, according to Maggie Gilliam, president of retail consulting firm Gilliam & Co.

Greatest Retail Concept

“Large stores are inherently more profitable than small ones,” said Gilliam, who is based in New York. “The supercenter is one of the greatest retail concepts ever created by mankind.”

In 2008, Wal-Mart rolled out the Marketside concept in Arizona, stores of 15,000 square feet that focused on fresh food and prepared meals. In 2009, the company converted two Neighborhood Market stores in Houston and Phoenix into Hispanic- themed grocery stores called Supermercado de Walmart, offering sweet breads and fresh corn tortillas.

As of Jan. 31, Wal-Mart had two Supermercados, four Marketside stores and 182 Neighborhood Markets. Internationally, Wal-Mart operates a broad range of smaller stores, particularly in Latin America. Simon has said that Wal-Mart’s smaller U.S. stores will draw upon what the retailer has learned abroad.

Wal-Mart rose 60 cents to $52.67 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 2.6 percent over the past 12 months.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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