Montchevre: Celebrating Goat Cheese as it Should Be
Venus Wafers - The Original Mariner Biscut Company - Made simple - Made right
Quality begins with passion
Could Walmart's Grocery Price Cuts Mean Trouble for Target?

Could Walmart's Grocery Price Cuts Mean Trouble for Target?

Thursday, October 20th, 2016

Walmart may be on the verge of causing a pretty substantial shakeup in the industry, according to a report from UBS analyst Michael Lasser. With the company initiating price cuts on thousands of items, particularly in the area of grocery, the firm's research has found that this may result in billions in losses to adversaries like Target.  

Lasser's report has shown the price cuts may cost Target, Dollar General, and Family Dollar up to $35 billion in business, and it seems as if retailers are responding to the news. Fortune reports that Dollar General revealed earlier in the summer that it would take 10 percent off prices for hundreds of its grocery staples, and Target told the news source that it was “re-emphasizing its low prices” in it’s marketing programs. 

Lasser’s report marks Target at a particular risk, citing its potential losses at up to $21.5 billion and 6 percent of its earnings per share. He says that 71 percent of Target locations are within a 10-minute drive of a Walmart Supercenter, and 90 percent are within a 20-minute drive, putting them head to head in nearly every market. And with Target focusing massive efforts into revamping its struggling grocery business, Walmart targeting grocery for its cuts makes the move especially challenging.

For discount retailer Dollar General, 81 percent of its locations are within a 20-minute drive from a Walmart. Fortune reports that whereas Dollar General was a big beneficiary of Walmart’s struggle to maintain market share during the great recession, these cuts could mean a reversal of roles. In total, Lasser suggests that Dollar General could lose $9 billion, and a 5 percent drop in its earnings per share. 

Big players won't be the only retailers to see issues stemming from the cuts either. “We think Walmart’s price investments could lead to some weaker players getting squeezed out of markets, which in turn should give it more power with its suppliers,” Lasser and UBS’s research reads.

Its too early to tell exactly how soon we’ll see these effects take place, or if they will ever, but Deli Market News will continue to keep our ear to the ground.