BMI View: Walmart is seeking to increase its competitive position, as discounters expand in the US' mass grocery retail (MGR) sector, with the company setting a goal to offer the lowest price on 80% of its sales. Given the retailer's bargaining power and commitment to keeping prices low, we believe the company is better-positioned than other incumbents in the US grocery market to cope with intense price wars. One of the main causes of Walmart's tightening margins is the price war taking place among grocery retailers in the US. Food prices experienced disinflation beginning around the start of 2015 and turned to deflation in early 2016, in part driven by supermarket chains undercutting each other on price. This places Walmart's revenue growth in a more positive light, given that the prices of its items have been falling over the past few years, while the company's US comparable sales have steadily increased. Its comparable sales of 1.8% in the 13 week period ending January 27 2017 was the fastest rate since 2012, and the company followed it up with another strong quarter ending April 30 2017 at 1.5%. This suggests reasons for optimism in Walmart's ability to cope with intense price wars.
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