Wal-Mart is reportedly gearing up for more aggressive food price cuts in order to put the pressure on traditional grocers and lure more shoppers to its stores, according to one industry analyst.
The company is “lacing up the gloves as it prepares to step back into the ring and win the modern day price war in food retail”, Citigroup analyst Deborah Weinswig wrote in a research note.
According to a report by MarketWatch, Ms Weinswig estimates that the retailer will increase its share of US supermarket sales to 21.6 per cent this year, up from 20.5 per cent.
Ms Weinswig also increased her 12-month price target on Wal-Mart shares to US$64, up from US$54.
According to Citigroup, an increase in price cuts by the three largest supermarket chains in the US – Safeway, Supervalu, and Kroger – have already been successful in preventing shoppers from heading to Wal-Mart or other food retailers.
“Shoppers no longer consider the price savings offered by Wal-Mart to outweigh the experience and convenience” of shopping at their local supermarkets, Ms Weinswig said.
Wal-Mart has reportedly confirmed it will reduce grocery prices, but denied to confirm by how much.
Analysts predict other grocery chains will pay close attention to Wal-Mart’s strategy and may be forced to roll-out more price cuts of their own.
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