As German discount grocer Lidl gains ground in the U.S., certain retail giants might be going too far to compete with it.
After Wolfe Research recently found that Walmart Stores Inc. (WMT) lowered its prices by more than 20% at certain stores in Virginia Beach and North Carolina, where Lidl now has a presence, and speculated that it may be selling certain fresh-food items below cost, now Target Corp. (TGT) appears to be revving up the competition further.
In Chicago last week, Wolfe analysts Scott Mushkin and Michael Otway observed that Target is selling a 38-ounce bottle of Kraft Heinz Food Co. (HNZ) ketchup at a new price of $2.49, from $2.99.
The analysts said the new cost is "generally below the price point that we have lately seen at Walmart."
"As we have been discussing in our research, we have growing concerns that the price discounting seen at retailers is afflicting most product categories," Mushkin and Otway wrote.
Wolfe said price cuts are spanning both private-label and branded products.
"We would further note that the discounting of private-label products may also be starting to exert pressure on branded-product pricing," Mushkin and Otway said.
On June 15, Lidl opened its first 20 stores in the U.S., in Virginia, North Carolina and South Carolina. As a result, Kroger Co. (KR) said that it marked down many of its prices at stores near the German grocer, including on a half-gallon carton of milk, which now goes for 99 cents in those locations compared to $1.29 in others.
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