LDN - Business

Target slashes prices on thousands of items, shares falter

[September 09, 2017] By Richa Naidu and Gayathree Ganesan

(Reuters) - Target Corp <TGT.N> said on Friday that it lowered prices on thousands of items, from cereal to baby formula, further hurting retail stocks already pressured by Kroger Co's <KR.N> disappointing quarterly results spurred by price cuts.

Target, which vowed earlier in the year to aggressively clamp down on prices to compete with rivals Wal-Mart Stores Inc <WMT.N> and Amazon.com <AMZN.O>, said it had spent months reassessing the prices of everyday items such as milk, eggs, razors and bath tissue.

The retailer, which said it would continue to offer discounts on some products in addition to the price-cuts, added that it had also eliminated more than two-thirds of its price and offer call-outs.

The retailer's shares were down as much as 4.7 percent in midday trading on Friday, in-line with a slump among retail stocks after Kroger reported price cuts hurting its bottom line.

Target wants to make it easier for customers to spot lower prices by removing the guesswork that comes with temporary deals, Mark Tritton, Target's chief merchandising officer, said in a blog post.

A-Line Partners analyst Gabriella Santaniello said the move might initially cost Target in margins, but that lower prices and fewer temporary price cuts may also drive sales volumes that could eventually offset eroding margins.

"At the end of the day people just want everyday lower prices and that is what Target is aiming to do."

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A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

When Target first announced in February that it would cut prices and miss full-year profit estimates, its shares plunged to a 2-1/2-year low.

Like Target, Kroger, the biggest U.S. supermarket company, has slashed prices on staples such as milk and eggs to fend off competition from Wal-Mart, discounters Lidl and Aldi, and the newly merged Amazon and Whole Foods Market.

Amazon.com's $13.7 billion purchase of Whole Foods has the grocery industry on edge, worried that the online retail giant could upend the fresh food business in the way it did with books and electronics.

Amazon last month lowered prices on some Whole Foods groceries including avocados and beef.

"I don't think this came out of nowhere. (Target) were clearly picking up on the signals and the consumer's response to Amazon and it is clear to me Amazon encroaching on their space," A-Line Partners analyst Gabriella Santaniello said.

Shares in Amazon were down 0.7 percent, while Wal-Mart was down about 2 percent and Kroger's stock tumbled nearly 10 percent, hitting a 3-1/2 year low.

(Reporting by Richa Naidu in Chicago and Gayathree Ganesan in Bengaluru; editing by Diane Craft)

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