Walmart to Boost Organic Food Sales - Analyst Blog

Per media reports, Wal-Mart Stores Inc. WMT plans to team up with the Wild Oats brand to offer organic food products at a cheaper price, which will be available only at Walmart stores.

Keeping in mind budget-constrained shoppers and the fast-growing category of organic foods, the retail giant has decided to sell organic packaged food under the Wild Oats brand at the same price as conventional foods and at least 25% cheaper than other organic brands available at Walmart. According to a research done by Walmart, approximately 91% of its shoppers would consider buying organic products at an affordable price.

Walmart stated that it will start with 100 Wild Oats organic food products including staples such as salsa, organic olive oil, canned black beans and tomato paste, which will be launched in about 2,000 Walmart stores. The company will later supply the discounted organic products to more than 4,000 Walmart stores across the country. They will also be sold on Walmart's website later in summer.

The move will increase Wild Oats organic products sales and revive Walmart's U.S. business, which grappled with declining same-store sales for four straight quarters in fiscal 2014. Also, it will pose stiff competition for Whole Foods Market, Inc WFM and The Kroger Co. KR, which may have to forcibly cut down the prices of organic products. While Whole Foods is one of the leading natural and organic foods retailer, with a strong brand image and marketing and merchandising expertise; Kroger has made its entry into the Organic & Natural food business.

According to the Organic Trade Association, organic food sales increased 10.2% to $29.0 billion in 2012. Though these organic goods are still a small part of the company's overall grocery business, their sales are growing at a faster rate than sales of conventional foods in almost every category. Walmart already sells more than 1,600 organic grocery items including produce, dairy products and branded packaged goods.

Walmart carries a Zacks Rank #4 (Sell).

However, a better-ranked stock in the retail sector is Companhia Brasileira de Distribuicao CBD, sporting a Zacks Rank #1 (Strong Buy).