Wal-Mart launches price-cutting campaign; Analysts question tactics

New York City Wal-Mart Stores has launched an aggressive campaign to roll back prices on thousands of products, The Wall Street Journal reported, as it seeks to reinforce its reputation as a discount leader and to reverse months of slowing U.S. sales.

Wal-Mart believes that, despite increasing consumer optimism, many Americans will continue to struggle in the months ahead. So, it is cutting prices this week on roughly 10,000 items, mostly food and other staples. The company declined to specify the sizes of the cuts.

"We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Wal-Mart has great deals," CMO Stephen Quinn told WSJ Thursday.

Wall Street analysts on Friday questioned whether the changes are much different from the world's largest retailer's usual promotions. Wal-Mart's price cuts are nothing new. Because it is so big, it has long been able to pressure vendors to work with it to offer lower prices than competitors. But analysts said the latest cuts -- coming after a fourth-quarter report that showed traffic decreased for the first time in three quarters -- are a response to toughened competition and partly an aggressive media campaign.

In a note to investors on Monday, JPMorgan analyst Charles Grom echoed the sentiment, noting that the price advantage for an average shopping cart at Wal-Mart compared with three traditional grocers has narrowed to 12% from 18.3% since April 2009.

Aside from promotions at the end of the aisles, "it was somewhat difficult for us to discern what was a 'new rollback' versus what was already on sale and simply received updated signage," he said.