The specialty food store, located in Old Town, has slashed the prices on all its items to at least 30 percent off this week.

Management is also shutting down the Oakville Grocery in Walnut Creek, retaining its three stores in Palo Alto, Napa Valley and Healdsburg.

According to Oakville Grocery President Jim Painter, the Oct. 15 announcement came on the heels of the "tough economic times." Painter said, "I think it's just the economy, and many people are out of work and not spending money right now."

Painter said that 68 people will be out of work from the closure of the two stores, and that management is trying to find them new jobs by contacting like businesses in the area. "The people working there have a passion for food," Painter said.

Open since 1998—when the new Old Town was unveiled—Oakville Grocery is the only food market in downtown Los Gatos. Painter described the store as "more of a Mediterranean store with European products."

The grocery has maintained a good relationship with the town through the years, Painter said, but the economy has made Oakville decide to focus on "its private-label brand, its catalog business, its biggest-volume stores and maximizing its websites."

Customers said they were surprised and saddened to hear of the closing.

One Los Gatan, who did not wish to be identified, said he often comes and eats lunch and drinks coffee on the patio. He said he had just come home from a three-week trip and was "very sorry" to learn of the closing.

"This is really what Los Gatos needs, more than an interior restaurant," the resident said. The man suggested that the space be turned into a "bistro-type," restaurant-only use. "It would be ideal. That's what Los Gatos needs," he said.

Napa Valley residents Neil Johnston and Madeline McFeely were in town for a wine-tasting event.

"We're kind of shocked to find that a place like this would close," McFeely said. McFeely often shops at the Oakville Grocery in Napa Valley and said, "If you cook and if you have a cultivated appreciation for food and wine, which people in this community must, you'd feel sorry about this."

"It's very much a European market," McFeely said.

Johnston added that consumers can find imported items at Oakville that aren't available at other gourmet shops, such as specialty wines and Spanish almonds.

"This is a big kids' candy store," Johnston said.

Painter said he does not know what the property owners, Federal Realty Investment Trust, are planning to do with the space.