Wal-Mart cut prices in some states where Kroger has a presence, potentially sparking price wars and pressuring profits, according to Supermarket News.
Price cuts are part of the mega-retailer's multi-year plan to invest in more competitive prices.
A Kroger spokesman declined comment, citing a quiet period ahead of the coming earnings report.
Let's face it: Sharp grocers read the papers. When they see the likes of Wal-Mart applying price pressure on Kroger — one of the strongest and smartest grocers in the nation — they lose sleep and sharpen their proverbial pencils.
A lot of competitors don't like Wal-Mart. Many resent (or envy) their immense buying power, which allow them to redirect shipments from one area to another to impact pricing. But competition, in this business, is what it is.
A large grocer like Kroger has similar buying power, as well as a reputation in the grocery business. Not only is the Cincinnati-based retailer the nation's largest that focuses primarily on grocery, but it's been flexing its muscles as well, buying smaller chains to expand its reach. In 2013, Kroger purchased Harris Teeter for $2.4 billion to grow in the South. The company operates, under its flagship and affiliated stores, 2,778 locations in the United States.
Grocery retailers aren't just competing against other stores in their area. Wal-Mart and Kroger also need to remain competitive with online retailers such as Amazon, which is strengthening its foothold in grocery. The challenge for grocers like Wal-Mart is that cutting prices could put further pressure on existing razor-thin margins and erode profitability. Margins in the supermarket industry are notoriously low, averaging 1% to 3%.