Inflation Evidence Grows in Retail: Walmart vs. Target, and Others

With all the funny money printed and quantitative easing measures after the recession, it has been amazing that the cost of goods has not risen through the roof. In fact, it has baffled many consumers and economists alike — and crushed many of the die-hard gold bugs. Now Credit Suisse released its pricing survey, showing continued signs of inflation.

The main focus is on Wal-Mart Stores Inc. (NYSE: WMT), but other comparisons were made. Credit Suisse’s Michael Exstein showed his findings. He said:

Our monthly pricing survey in Dallas and Chicago showed an uptick in inflation and a widening price gap between Walmart and competitors. Walmart’s price advantage versus other retailers surveyed increased (16.4% in March vs. 14.5% in February), the largest gap observed since October of 2013.

Target Corp. (NYSE: TGT) was targeted as well, no pun intended. Exstein said that Target’s price position widened sequentially versus Walmart. He said:

Our survey showed an uptick in inflation, as the average basket price across all surveyed retailers increased 2.7% year over year, continuing the positive trend beginning in November.

Prices of food were shown to have risen by some 4.4% year over year, the largest increase since September 2012. Household products prices increased 2.9% and HBA prices were up 1.1%.

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Exstein elaborated more on Walmart’s pricing, showing that it declined 40 basis points sequentially, but it was up by 290 basis points year over year, slightly higher than the 270 basis points gain that seen across all surveyed retailers. On a month-over-month basis, prices at Walmart were shown to have declined 0.4%, while prices across all retailers surveyed rose by 1.3%.

Exstein further noted that Walmart’s average gap relative to others was 16.4% in March, above February’s price gap of 14.5% and roughly in line with the one-year average of 16.5%. Walmart’s price gap with Target, CVS, Kroger, Mariano’s, Albertson’s, Safeway and Jewel narrowed. But Walmart’s price gap with Walgreens widened.