Walmart Stays Strong on Price Investment Strategy as Marketplace Heats Up
- by Melissa De Leon
BENTONVILLE, AR - Amongst the rise in discount grocers in the U.S., Walmart is looking to hedge its bets on its promise of "Every Day Low Prices." The retail giant is seeing stronger unit growth in its mass market products, according to news source Markets Insider, thanks to “price investments,” or accepting lower margins in order to maintain a competitive advantage.
"We see Walmart’s price actions driving stronger share," Credit Suisse Analyst Seth Sigman wrote in a note to Markets Insider, "but at a cost, consistent with our estimates, which along with valuation is what keeps us on the sidelines."
While the analyst noted that Walmart is likely attracting consumers with the move’s success of maintaining those price deals, it believes the retailer will see "a slight moderation" in total sales growth as prices decline more than units increase.
Absorbing the costs while still trying to improve margins make for a challenge in the race to offer the best discounts for popular products. Walmart has also made many moves to grow its e-commerce business, including acquisitions, technologies, and department consolidation.
Sigman's price target for Walmart, the source reported, was $102 per share, around 16 percent above its current level—though he maintained his "neutral" rating.
Walmart's stock was trading at $88.13 per share at the time of this article.
Will the retailer continue to depend on this strategy, as Credit Suisse predicts, or does it have a new move already up its sleeve? AndNowUKnow will follow this and other news influencing fresh produce.