Wal-Mart prices going up

The mega-retailer has been raising prices faster than mainstream grocery stores, losing some of its discount lead.

By Kim Peterson Aug 16, 2010 2:00PM

Wal-Mart logo © WalmartWal-Mart (WMT) has been quietly raising its prices, giving little weight to fears that shoppers may have less spending money if deflation takes hold.

A recent study by JPMorgan Securities found that the mega-retailer has upped prices by nearly 6% over the last six weeks, according to The New York Post.

Analysts studied pricing at a Wal-Mart supercenter in Virginia, and found that a 32-ounce bottle of Windex, for example, saw an increase from $1.97 to $2.97. A 12-ounce box of Quaker Oats saw a 65% increase, and the price of a container of Tide detergent jumped 50%.

Reuters blames the price increase on the rising costs of raw materials and oil. But that's only a small part of the story, since competitors like Safeway (SWY) only raised prices by about 1% in that same period. Kroger (KR) and Whole Foods (WFMI) even cut prices during that time.

What we may be seeing is a new philosophy at Wal-Mart after a changing of the guard. The chief merchant and the leader of the company's U.S. division have stepped down in recent weeks, the Post reports. The new pricing may be a strategy pushed by their replacements.


 Post continues after video:

Wal-Mart still beats traditional grocery stores on most prices, one JPMorgan analyst told the Post. But not by as much as before. Its lead has dropped to 10.4% from 16% in June, the analyst said.

There is more attention being paid to retail prices now as debate grows about whether we're headed for inflation or deflation. Food and lower-priced items -- Wal-Mart's specialty -- may be in a pocket of inflation, while deflation is more of a threat for bigger-ticket items like cars and furniture, Reuters reports.

High unemployment and a pullback in shoppers' spending are fanning worries about deflation. "No industry suffers more from deflation than retailers," one economist told Reuters.
So how is Wal-Mart looking as a stock play? One asset manager says the stock has been a dud for years. Wal-Mart shares are cheaper than Target (TGT) or Costco (COST), trading at 13 times earnings and 11.6 times next year's earnings.

"Although the retail giant is the largest in the country and generates more revenue and net income than Target and Costco combined, it has actually been the worst investment over the past 10 years," writes Mark Riddix on Seeking Alpha.

More from MSN Top Stocks:
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
264 rated 2
485 rated 3
679 rated 4
640 rated 5
617 rated 6
632 rated 7
493 rated 8
276 rated 9
153 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.