Wal-Mart Investments In Low-Pricing Put Pressure On Everyone From Grocers To Dollar Stores

Daniel Binder, a consumer and retailer analyst at Jefferies, commented in a research note on Monday that his August pricing work shows Wal-Mart has widened the gap with most competitors. Specifically, data gathered in the Charlotte, Houston and Phoenix markets show Wal-Mart's price advantage "widened" against dollar store chains including Dollar General Corp. DG and Family Dollar.

"Given the regional nature of price investment, we may not capture the full impact of what WMT is doing, but recent data shows it continues," Binder wrote. "DG had some price cuts during the observed periods too, but not as significant. Family Dollar has been less aggressive."

Related Link: Kroger's Guidance Cut Looks Modest Relative To Peers' Outlooks

Binder acknowledged that Wal-Mart benefited in the second quarter from better terms with its vendors, lower transportation costs, lower shrink and lower markdowns. In addition, the analyst "would not be surprised" if the retailing giant details to investors additional cost out initiatives in October during its analyst day to fund additional price investment activities.

Binder also noted that within the grocery space, Wal-Mart introduced price cuts in all three of the markets that compare favorably to Target Corporation TGT, which was flattish. Traditional grocers were mostly flat to slightly up.

Finally, within the non-grocery space, Target narrowed the gap to Wal-Mart but Wal-Mart could "step up" with its seasonal business in the fall and holiday season.

Shares of Wal-Mart remain Buy rated with an unchanged $86 price target.