Walmart (NYSE: WMT | WMT Price Prediction) announced it is dropping prices on thousands of items it sells in its stores. It says the plan is to save Americans money as the nation moves through the summer. One notable example of the decision is that it has dropped the price of Coca-Cola, Diet Coke and Coca-Cola Zero Sugar 24-packs to $9.97 from $14.97. That is a 33% markdown.
The Walmart announcement of the decision said, “From weekly grocery trips and backyard cookouts to vacations and summer fun, Walmart is helping customers save on the products they need all season long.” In other words, it is doing American consumers a favor.
What is not clear is why and how Walmart is doing this. As a massive retailer, it can probably get discounts from suppliers. Nevertheless, Walmart works on small margins. In the most recently reported quarter, Walmart U.S. had revenue of $117.2 billion. Operating income was $5.9 billion, or 5%.
There is speculation that President Trump has pressured Walmart to cut prices to reduce inflation in America. However, there is no proof that this is the case. Trump did post on social media that the decision was a “huge deal.”
While the decision certainly squeezes Walmart’s margins, it may help its market share, particularly if its rivals do not match the plan. Walmart is by far the largest bricks-and-mortar retailer in the nation. Walmart claims that its “5,200 stores and clubs are within 10 miles of approximately 90% of the population.”
Walmart has long claimed one reason people should shop at its stores is “Everyday Low Price.” Based on store traffic, many Americans seem to believe that is true.” Less clear is why the retailer made the new pricing decision.
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