Wal-Mart ready for hard discounters - and Amazon

Wal-Mart Stores Inc’s (NYSE:WMT) UK chain Asda has had its backside kicked by hard discounters, but the US mothership is much better prepared.

That’s the claim of David Cheesewright, president and chief executive of Walmart International.

Broker Jefferies hosted meetings in Toronto with Cheesewright in which he maintained management would be better prepared to deal with hard discounters in the US than it was in the UK, where all of the major players have struggled to deal with the arrival of Aldi and Lidl.

The chain is preparing for an onslaught by improving quality, prices and own-label products.

“In the process of muting the growth of hard discounters, it believes its work should allow it to take share from other larger competitors and this could prove to be the bigger prize,” Jefferies reported in a research note, in which it reiterated its ‘buy’ recommendation.

The company is also acutely aware of the threat posed by Amazon.com, but Cheesewright believes having both an online presence and bricks and mortar outlets will lead to a “multiplier effect” on sales.

Like Amazon, Wal-Mart enjoys global scale, which should enable it to compete on price.

Jefferies has a price target of US$86, versus a current share price of Wal-Mart of just under US$73.

Story by ProactiveInvestors