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A familiar story on the pricing front


Target and Walmart remain in what is essentially a dead heat as far as prices on food and consumables are concerned, according to the most recent study of prices in Dallas and Chicago conducted by Credit Suisse. The firm looked at a basket of 60 items across the two markets, as it does every month, and in keeping with prior comparisons, the data for April showed Target lagged Walmart by 3.4% in Chicago and 4.6% in Dallas. Neither figure takes into account Target’s REDcard Rewards program, which shaves 5% off the price paid at Target and enables REDcard holders to pay less at Target than they would at Walmart.

It is a familiar pattern that has emerged since the introduction last fall of the 5% program, but what’s changed is Walmart’s more rational approach to pricing as it too is looking to pass through product cost inflation. In the past, Walmart was notorious for using pricing actions during periods of inflation to gain market share, reasoning that the increased sales volume generated would be enough to offset the margin impact. However, Walmart took its prices up in April, and the average gap with competitors in the survey narrowed to 16.8% from 17.8% the prior month. Credit Suisse also found that Walmart has been among the most aggressive in terms of passing through inflation to customers. During the past three months, Walmart’s prices on the 60 food, health and beauty and household items the firm tracks each month increased 2% during the past three months and over the past year prices have risen by 3.6%.

The firm noted that food inflation at all retailers was up 4.9% in April and was particularly pronounced at Walmart where it was up 6.6%.

As for food prices, that was the area where Target was most competitive. Its prices on food were within 2.8% of Walmart in Chicago, and its food prices in Dallas were 1.7% lower before factoring the REDcard 5% discount.

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