Grocery Wars - Walmart Maintains Dominance With Lowest Prices In December, Target Retains #2 Spot: Analyst

Telsey Advisory Group analyst Joseph Feldman forecasts grocery sales to moderate in the fourth quarter and early 2024 due to the expected further easing of inflation and/or deflation.

The US Department of Agriculture (USDA) expects food inflation/(deflation) to be in the range of (2.0%)-4.7% in 2024 vs. 5.7%-5.9% in 2023.

This comes with food-at-home inflation/(deflation) of (5.3%)-4.6% in 2024 vs. 4.9%-5.1% in 2023.

Based on recent comments from Kroger Company KR and other grocers, units are starting to show a sequential improvement as inflation moderates and selective promotions return. Still, overall unit growth has been slower than anticipated and slower than the price decline, the analyst adds.

The analyst's December 2023 online grocery pricing study indicated that Walmart Inc. WMT maintained its price leadership, with product prices down 1.6% from September.

According to Feldman, Target Corporation TGT and Kroger remained closest to Walmart, with an unchanged price premium to Walmart in the HSD-LDD area, excluding any loyalty benefits, which are quite solid.

The price premiums of Albertsons Companies, Inc. ACI, Amazon.Com, Inc.'s AMZN Amazon Fresh, and Whole

Foods to Walmart's basket grew, now in the high-teens to high-20s range vs. the high-teens to low-20s range previously, the analyst notes. 

According to Feldman, Sprouts ended up being the most expensive grocer, with a price premium of low 30% to Walmart.

Overall, Walmart secured the lowest-price position by a significant margin, partly reflecting lowered grocery prices. As a result, compared to the other grocers the analyst surveyed, Walmart's price leadership increased to 20.6%, on average, from 18.5% in September. Feldman reiterated Walmart's outperform rating with a price target of $185.

Target's December 2023 grocery basket price decreased 1.6% from September, the analyst notes. As such, Target's price premium to Walmart remained unchanged at 8.4%—making Target the second-lowest price provider after Walmart. Feldman reiterated Target's outperform rating with a price target of $160.

In December, the price of Kroger basket declined 1.7% from September. As a result, Kroger's price premium to Walmart was unchanged at 10.8%.

The analyst reiterated the Outperform rating on Kroger, with a price target of $55.

Price Action: WMT shares are trading lower by 0.09% to $157.74, while TGT shares are trading higher by 0.04% to $142.44, and KR shares are trading lower by 0.12% to $45.15 on the last check Thursday.

Photo via Walmart