Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Raymond James Downgrades Value Retail Sector As Walmart Fuels Price Competition

Courtesy of Benzinga.

Raymond James Downgrades Value Retail Sector As Walmart Fuels Price Competition

Walmart Inc (NYSE: WMT) is on the offensive with an increasingly competitive price strategy, and discounted retail could take a hit.

The Rating

Raymond James analyst Dan Wewer downgraded the following stocks from Strong Buy to Outperform:

  • Big Lots, Inc. (NYSE: BIG), with a price target cut from $60 to $48;
  • Dollar General Corp. (NYSE: DG), with a price target cut from $110 to $105; and
  • Dollar Tree, Inc. (NASDAQ: DLTR).

The Rating

The downgrades were based on a comparative study of branded consumer goods.

“Our latest survey provides evidence that Walmart is reinvesting some of its tax savings into pricing as part of an effort to grow market share,” Wewer said in a Monday note. (See the analyst’s track record here.) 

Walmart’s prices had previously been in line with Dollar General, but since February, it’s cut the value of traffic-generating products to create a 4.4-percent gap in the companies’ baskets, the analyst said. 

Big Lots, meanwhile, closed in on Walmart with a mere 1.9-percent cost disparity. Pricing initiatives in Big Lots’ food segment helped it achieve the second least-expensive basket in Raymond James’ survey.

“Although Walmart’s aforementioned price gap is not yet alarming relative to Dollar General and Family Dollar, it does increase the risk for the value retailers,” Wewer said. 

Competitors are challenged to protect market share with margin-eating price cuts or protect margins while conceding comps. The problem compounds a hike in milk and egg prices.

Notably, Wewer remains bullish on Big Lots, Dollar General and Dollar Tree, as valuations are lingering below historical averages and the companies continue to beat drugstores in cost. Dollar General’s prices are 34 percent below those of CVS Health Corp (NYSE: CVS) and 29 percent below Walgreens Boots Alliance Inc (NASDAQ: WBA), he said. 

Price Action

At the time of publication, Dollar Tree was up slightly at $97.25, Dollar General was up 0.22 percent at $96.49 and Big Lots down was up 1.62 percent at $42.71. 

Related Links:

Wells Fargo Calls A Peak In Discount Retail, Downgrades TJ Maxx’s Parent Co.

3 Reasons Why Big Lots Is Off Oppenheimer’s Shopping List

Latest Ratings for WMT

Date Firm Action From To
Mar 2018 Oppenheimer Downgrades Outperform Perform
Feb 2018 Credit Suisse Initiates Coverage On Neutral
Feb 2018 Morgan Stanley Maintains Equal-Weight Equal-Weight

View More Analyst Ratings for WMT


View the Latest Analyst Ratings

Posted-In: Dan Wewer Raymond JamesAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!