TGT vs WMT, price gap continues to narrow analysts say

The latest pricing studying from Deutsche Bank analyst Charles Grom shows a basket of 50 items is still cheaper at Walmart than Target, but by a slimmer margin than in the past.

“Walmart maintained its price leadership position over Target in our Octoberpricing comparison (across 50 SKUs), however the spread narrowed sequentially suggesting significant price investment by Walmart has yet to occur,” according to Grom. “In fact, the basket for the 22 identical items we have tracked since March 2006 rose 4.7% sequentially and 3.1% year-over-year at Walmart to a multi-year high level driven by inflation in food (cereal, coffee, soft drinks) and household items. Interestingly, for the second consecutive month, Target’s food basket (19 items or 38% of the mix) were below Walmart’s aided by temporary price cuts.”

The Deutsche Bank survey results released on Friday confirmed results of a similar pricing study released the prior day by Credit Suisse. According to the firm, which looks at prices on 60 items in the Dallas/Fort Worth and Chicago markets, Walmart and Target raised prices in September compared to August, but Walmart went up by 0.9% and Target by 0.5%. On a comparison to the prior year, Walmart’s price went up 5% and Target was up 2.6% and Target’s price gap versus Walmart decreased slightly from 1.7% to 1.3%.

“Despite Walmart’s publicly stated goal to be ‘relentless in widening the price gap,’ it seems that Walmart’s price gap is contracting. Although this could be a positive read-through for other retailers, it could also cause the company to renew its focus on strengthening its price leadership in the industry,” according to Credit Suisse.