After entering the increasingly intense price war with a clear advantage over its rivals last month, German grocer Lidl seems to be losing steam.

During a recent visit to Spartanburg, S.C., Jefferies found that Lidl is beginning to lose the price advantage it held over Walmart Stores  (WMT) and ALDI in June, when it opened its first 20 U.S. stores in Virginia, North Carolina and South Carolina.

"The prices in this [South Carolina] location were in line with ALDI and Walmart when it opened, but the latter two retailers have since reduced their prices," Jefferies analyst Daniel Binder said in a Monday, July 24, note. "Lidl has not followed suit."

The major discounts that consumers are seeing at Walmart and ALDI, such as the 29-cent deal for a carton of a dozen eggs, are not being mirrored at Lidl, according to Jefferies.

A Lidl store.
A Lidl store.

"Also of note, Lidl's prices on some nationally branded items are higher than its competitors," Binder wrote.

Ahead of the grocer's grand opening, Dollar General (DG) , at stores in South Carolina located just two to three miles away from Lidl, reduced the price on some 50 to 60 core items by as much as 30%.

"In fact, two stores in the district we visited and two in a neighboring district apparently saw an acceleration in comps as Lidl entered the market and Dollar General dropped prices," Binder said.

When Lidl first opened its stores on June 15 this year, Jefferies said it found the German grocer to be "the most aggressively priced," with its competitors priced at a 3% to 16% premium to it. That has since changed.

Still, some analysts have warned that the price wars are going too far.

Wolfe Research analysts Scott Mushkin and Michael Otway recently found that Walmart is selling certain items below cost at stores located near Lidl.

"Not only are we seeing private-label compression but Virginia Beach is also showing further pressure on branded items, something we believe will likely accelerate as private-label pricing collapses further," Mushkin and Otway wrote. "Our concerns regarding Walmart are mounting."

As for Aldi, the new picture from a location underscores what Walmart, Costco (COST) , Kroger (KR) and Whole Foods (WFM) are up against in these new overseas discounters. Good luck. 

Why Aldi is going to crush everyone:

$0.59 mustard pic.twitter.com/spWLDLfoxM

— Brian Sozzi (@BrianSozzi) August 4, 2017

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