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Walmart cuts prices ahead of holidays to boost sales { November 21 2006 }

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http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20061121&ID=6216927

November 21, 2006 3:50 PM ET
Wal-Mart cuts prices on food ahead of holidays

CHICAGO (Reuters) - Wal-Mart Stores Inc. , the largest seller of food in the United States, slashed prices on hundreds of grocery items on Tuesday, putting more pressure on traditional grocers just two days before Thanksgiving.

Wal-Mart, the world's largest retailer, has already cut prices on toys, appliances, electronics and apparel to attract more holiday shoppers. Now it is also trimming prices on hundreds of fresh and dry grocery items.

The retailer is eager to attract more shoppers this holiday season after back-to-back months of disappointing sales growth in September and October. Wal-Mart has said it expects the markdowns to help improve sales growth. Holiday discounts could be coming in other parts of its stores, but Wal-Mart declined to give details.

Wal-Mart said that the price of many food items would be lowered by as much as 20 percent. Some items were discounted more heavily.

"While the company remains highly promotional and competitive, we believe that its 'bark' is worse than its 'bite'," Citigroup analyst Deborah Weinswig wrote in a recent research note.

The prices of some items for Thanksgiving dinners are being slashed. A six-ounce box of Kraft's Stove Top stuffing sells for 88 cents, down from $1.44 to $1.74 per box. A can of Ocean Spray cranberry sauce is now 88 cents, down from $1.14 to

$1.36.

Among the other rollbacks, a 26.4-ounce pack of boneless, skinless chicken breasts from Pilgrim's Pride Corp. , Tyson Foods Inc. or Perdue will now sell for $4.74, or $2.87 per pound, down from $5.35, or $3.24 per pound. That discount follows an abundance of chicken in the industry.

General Mills Inc.'s Betty Crocker potatoes and Chex cereal, Sara Lee Corp.'s Lit'l Smokies cocktail links and Planters deluxe mixed nuts and whole cashews, from Kraft, are some of the other discounted foods.

Wal-Mart said the lower prices, or rollbacks, would be in effect throughout the season.

"There is a general perception that Wal-Mart is being more aggressive this holiday season. However, we believe that this misconception has been driven by improved (and earlier) communications/marketing by the company," Weinswig wrote.

Wal-Mart declared an early start to the holiday season by cutting pricing on more than 100 toys and games on October 18.

Weinswig said that Wal-Mart plans for the same number of 'rollbacks' and the same level of discounting for the holiday season as last year.

In the past, Wal-Mart's lower prices on food have weighed on grocers, as shoppers switched stores to get better deals.

Kroger Co. , the largest U.S. grocery chain, said in response to Wal-Mart's plan that it "consistently" offers its customers "competitive prices."

The next-largest U.S. grocery chains, Supervalu Inc. and Safeway Inc. , could not immediately be reached for comment.

Grocery, candy and tobacco items accounted for 30 percent of sales in Wal-Mart's discount stores and supercenters in the fiscal year ended January 31, up from 28 percent a year earlier. Food accounted for 30 percent of sales at Sam's Club stores, down from 31 percent a year earlier.

Shares of Wal-Mart, which is based in Bentonville, Arkansas, rose 5 cents to $47.77 on the New York Stock Exchange. Shares of traditional grocers were mixed.

Copyright 2006 Reuters


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