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Wal-Mart Brings Price War to Groceries, Boosting Pressure on Big Food Retailers

Wal-Mart Stores Inc.'s fight to defend its low-cost reputation is helping to extend the longest food-price decline in decades.

Wal-Mart Brings Price War to Groceries, Boosting Pressure on Big Food Retailers

The world's biggest retailer is investing heavily to lower prices in its U.S. stores, the company’s executives say, as competition heats up against Amazon.com Inc. and European deep discounters Aldi and Lidl. Wal-Mart is spending to beat competitors' prices and test strategic price drops, mostly on food and household goods sold at Wal-Mart stores in the Southeast and the Midwest, say people familiar with the tactics.

Wolfe Research recently found prices for a basket of grocery items at Philadelphia area Wal-Mart stores were 5.8 percent lower than a year ago, while those in the Atlanta and Southern California markets were 4.9 and 2.7 percent cheaper, respectively.

The price war, coupled with Wal-Mart’s renewed focus on refurbishing stores, is hurting the nation’s biggest grocers. Operating profits for U.S. supermarkets declined about 5 percent last year, Moody’s Investors Service said.

Kroger Co. , the biggest U.S. supermarket chain, recently reported its first quarterly decrease in same-store sales in 13 years. Cincinnati-based Kroger’s shares fell 3 percent in February after Wolfe Research reported that Wal-Mart was cutting prices in the Midwest. The stock later recovered, but remains down 13 percent this year.

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The world's biggest retailer is investing heavily to lower prices in its U.S. stores, the company’s executives say, as competition heats up against Amazon.com Inc. and European deep discounters Aldi and Lidl. Wal-Mart is spending to beat competitors' prices and test strategic price drops, mostly on food and household goods sold at Wal-Mart stores in the Southeast and the Midwest, say people familiar with the tactics.

Wolfe Research recently found prices for a basket of grocery items at Philadelphia area Wal-Mart stores were 5.8 percent lower than a year ago, while those in the Atlanta and Southern California markets were 4.9 and 2.7 percent cheaper, respectively.

The price war, coupled with Wal-Mart’s renewed focus on refurbishing stores, is hurting the nation’s biggest grocers. Operating profits for U.S. supermarkets declined about 5 percent last year, Moody’s Investors Service said.

Kroger Co. , the biggest U.S. supermarket chain, recently reported its first quarterly decrease in same-store sales in 13 years. Cincinnati-based Kroger’s shares fell 3 percent in February after Wolfe Research reported that Wal-Mart was cutting prices in the Midwest. The stock later recovered, but remains down 13 percent this year.

Read Full Article

Wal-Mart Brings Price War to Groceries, Boosting Pressure on Big Food Retailers