Citigroup Recommends WMT And WINN In The Clubs And Discounters Segment

The clubs and discounters have gained food market share in 2009 at the expense of supermarkets, as the “recession drove traffic to these value-oriented destinations.” Citigroup says, “However, share gains moderated YOY, especially at Wall Mart Stores WMT. In 2010, we expect price competition amongst the food retailers to heat up, ignited by WMT’s aggressive price investment program (“rollbacks”), which began in March. We believe an old-fashioned price war could break out, and reiterate our cautious stance on the supermarkets.” “WMT gained +51 bps of average market share in 2009, the smallest YOY increase since we began tracking food market share in 2004. The deceleration was driven by a narrowing price gap with the supermarkets and slower supercenter growth… Winn-Dixie Stores Inc WINN and Kroger Company KR were the best performing supermarkets in 2009, gaining 8 bps and losing only (-2) bps of market share, respectively,” the analysts mention. Citigroup adds, “We attribute the strong performance by these retailers to more aggressive pricing actions, a passive pricing strategy by WMT, and an already narrow price gap between KR/WINN and WMT.. WINN was the only supermarket in our coverage universe to gain market share in 2009! This is the first time since 2001 (earliest available data) that WINN has gained market share. We believe an end to store divestitures, slower square footage growth by WMT in WINN’s Southeast markets, and WINN’s remodeled stores drove the market share gains.” The analysts recommend the investors to own WMT and WINN. More Analyst Ratings here