Wal-Mart Cuts Don't Widen Price Gap: Analyst

ELLIOT ZWIEBACH

BENTONVILLE, Ark. — The price cuts Wal-Mart Stores here made April 1 may not be as severe as supermarket operators had anticipated, though the possibility of further cuts "does leave a cloud over the group," Mark Wiltamuth, executive director for Morgan Stanley, New York, said Friday.

Wal-Mart said it has cut prices on approximately 10,000 items, mostly in food and staples. The company also said in published interviews it plans to expand the number of price cuts in the coming months by encouraging suppliers to reduce their selling prices in exchange for spotlights on those items.

Based on surveys in Dallas and Chicago, Wiltamuth said the price rollbacks "do not look overly threatening to the grocery channel. [There was] little change in Wal-Mart's relative price advantage over conventional grocers ... [which] should be a relief to grocery investors."

He said the price gaps remained unchanged at about 15% to 20% lower on everyday pricing and 10% to 15% lower on promotional pricing, with more emphasis — including beefier end displays — on branded consumables such as personal care, beverages and snack items.

"While some speculate this is just a six-week campaign, our supplier sources tell us the more aggressive rollback campaign will continue in waves through 2010," Wiltamuth said. "Wal-Mart intends to increase the intensity of its rollbacks on price, not the number of items it rolls back."

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