Wal-Mart's Price Blitz

The upcoming holiday season is looking like a bonanza for bargain-hunters -- but perhaps a rougher time for many retailers. In the latest offensive of its ongoing war against rivals, Wal-Mart (NYSE: WMT  ) is cutting prices on small appliances.

Just last week, after slashing toy prices, Wal-Mart announced reduced prices on electronics. That's left some investors wondering how retailers like Best Buy (NYSE: BBY  ) , Circuit City (NYSE: CC  ) , Target (NYSE: TGT  ) , and even Amazon.com (Nasdaq: AMZN  ) might respond -- or how they might be affected.

Wal-Mart is lowering prices on 50 household staples, including coffee makers and microwaves. It's also reducing prices on its Metro 7 apparel line, its nascent attempt at trendier clothing options -- an obvious volley against Target's cheap-chic duds. However, so far it appears that Wal-Mart hasn't gotten far with Metro 7. (Almost exactly a year ago, I expressed doubts about Wal-Mart's efforts in this area.)

It's hard to ignore Wal-Mart's recent sluggish sales; the market found October's sales data troubling. The slowdown's been partially blamed on tough comparisons to last year's busy hurricane season, and to the remodeling Wal-Mart's undertaking at some stores. But in my opinion, investors have good reason to worry about how a behemoth like Wal-Mart will drum up future growth.

As I noted last week, this has been a transitional year for Wal-Mart. It's made some major plans and initiatives to foster both growth and goodwill in the face of its vocal critics. Some may say that price means everything, but last month I ran across interesting survey data indicating that some consumers take elements beyond price -- like corporate social responsibility, and a company's perceived treatment of its workers -- into consideration when making their purchasing decisions.

Regardless of whether Wal-Mart's continued price-slashing is a sign of weakness or strength -- I'll admit I'm a Wal-Mart bear -- it's enough to make its investors, and those of its rivals, a little bit nervous. Price wars aren't good news for margins, although they can drive sales. Hopefully, these companies won't be in a race to the bottom when it comes to pushing merchandise this holiday season.

Grab a cart and pick up some related Foolish content:

Wal-Mart is aMotley Fool Inside Valuerecommendation. Best Buy and Amazon.com areMotley Fool Stock Advisorselections.

Alyce Lomax does not own shares of any of the companies mentioned. As of this writing, she was ranked 2,063 out of 12,825 in CAPS.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 517297, ~/Articles/ArticleHandler.aspx, 12/22/2014 11:24:49 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement