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    Wal-Mart Battles Tesco with Small Format in California

    Company will expand its Neighborhood Market format with stores opening in Southern California in 2008.

    BENTONVILLE, Ark. -- In an effort to expand its presence in California, Wal-Mart is launching two of its 42,000-square-foot Neighborhood Market smaller format stores in Southern California, in Coachella and La Quinta, Calif. The two store sites will compete with at least seven of Tesco's Fresh & Easy Neighborhood Markets in the Coachella Valley, including two in La Quinta and one in Coachella, the Financial Times reported.

    Wal-Mart's first store in the state will be located in Coachella, Calif., and is expected to open sometime next year, which will be followed by another store in La Quinta, Calif., according to the report. Both stores are within a few miles of the company's Supercenters in the Coachella Valley, the report stated.

    Previous efforts to enter California were with the company's Supercenters, a 180,000-square-foot model, which combine groceries and general merchandise. However, intense opposition from local labor and environmental activists has affected its plans in the state.

    Currently, the company has 31 Supercenters in the state, out of its 2,300 Supercenters in the nation, the FT reported.

    Wal-Mart launched the Neighborhood Market format in 1998, according to the report, and has used the stores as fill-in to major markets in Las Vegas, Phoenix and Orlando -- two of which are also areas Fresh & Easy will be opening in 2008.

    "This is their convenience market near the Supercenter, serving someone who doesn't want to go into a 200,000-square-foot building just to buy groceries," Hank Gordon of Laurich Properties, the developer of the first two California store sites, told the FT.

    Wal-Mart executives are expected to reveal its 2008 store development plans at a two-day analyst meeting that began yesterday, the report stated. Wal-Mart is also exploring new formats, and published reports claim one of which is a convenience store. In addition, the company has recently registered for new trademarks, including "City Thyme" and "Field and Vine" to cover unspecified "retail grocery store services," FT reported.

    "To continue their growth they're going to have to target urban areas, and it will be incumbent on them to develop smaller formats," Curtis Barlow, of commercial real estate brokers Lyle & Associates, told the Financial Times.

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