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Whole Foods Is Ramping Up Its Price Cuts; Should Walmart Be Worried?

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Whole Foods Is Ramping Up Its Price Cuts; Should Walmart Be Worried?
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After Amazon.com, Inc. (NASDAQ: AMZN) purchased Whole Foods, the (once) expensive grocery chain immediately became a threat to Wal-Mart Stores Inc (NYSE: WMT)'s grocery business.

While Whole Foods previously was never in the same conversation as the world’s largest retailer due to the former's clientele and expensive prices, now under the Amazon umbrella, it is inheriting a new competitive edge against Walmart.

As Benzinga previously reported, Amazon's emphasis of market share over profits could severely disrupt the grocery pricing model. 

When Loop Capital analysts visited the “new” Whole Foods, a key takeaway was that the grocer may have lowered additional prices and that Amazon may be perceived as Walmart’s key competition in most general merchandise categories.

In all, over 400 prices were lowered at Whole Food’s after Amazon took over. When news first broke of Amazon lowering prices, only 100 items were reported.

“As we looked around the store, we believe this may have been reflected in a combination of both lower everyday price tags and an increased amount of sale price tags,” said Andrew Wolf, managing director at Loop Capital.

Wolf also noticed that produce and dry grocery items at Whole Foods, key departments that have been underperforming received solid increases in volumes since price cuts.

Walmart has already been responding to Whole Foods improvements by bettering its own food merchandising efforts.

“Wal-Mart’s increased wages and benefits have helped store management retain trained workers which has boosted critical merchandising efforts in produce in particular,” said Wolf.

As the war heats up between Amazon/Whole Foods against Walmart in the grocery department, Loop Capital remains cautious on food retailing as whole because of the heightened competitive cycle that the industry is currently in.

Related Link: Amazon's Emphasis Of Market Share Over Profits Could Keep Whole Food's Prices Low

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Oct 2018JefferiesMaintainsBuyBuy
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