Walmart: Taking on Retailers with Price Cuts

David Marino-Nachison

April 16, 2018 9:21 a.m. ET

Walmart is already known as a cut-price retailer—and now it might be cutting further.

In a Monday note, Raymond James analysts reported the results of a survey, conducted every eight weeks, of prices on a basket of food and personal care products at Walmart (WMT) and a range of other retailers, including discounters, grocers and drug and convenience stores, in the Atlanta area.

In the latest survey, they wrote, something changed: Barron’s Next 50 company “Walmart is becoming increasingly price competitive,” they wrote, citing “evidence that Walmart is reinvesting some of its tax savings into pricing as part of an effort to grow market share.”

The note focused on the effects for other discount chains. “Walmart pricing for national branded consumables is now 4.4% lower compared to Dollar General (DG) (the largest gap since April 2017’s -7.0%) and 6.5% below Family Dollar (compared to a -3.6% gap in February) — on selling prices (promotions included) of 25 items. We are finding the prices for the Walmart basket declined 3.8% from February 2018 through April 2018, led by reductions for traffic generating products such as Cheerios (-42%), Heinz Ketchup (-14%), and Old Spice Body Wash (-24%).”

As a result, they cut their price targets for Dollar General and Big Lots (BIG)—though the kept their target on Dollar Tree, citing a refinancing expected to lower interest expense.

Walmart is, of course, battling on several fronts along with domestic store competition. Some recent examples: Barron’s has recently covered the potential effects of a trade war, possible growth opportunities overseas, and the pros and cons of private label expansion.

Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison.

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