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Is Kroger Beating Walmart In The Price Wars?

|Includes: Kroger Co. (KR), TGT, WMT

Kroger (NYSE: KR) might be beating Walmart (NYSE: WMT) in the grocery wars. The grocery giant quietly cut prices on 1,000 products at 120 stores in the Mid-Atlantic region.

The price cuts were uncovered by grocery analyst David Merrefield, in a piece for The Robin Report. Merrefield believes that Kroger is now successfully undercutting Walmart's prices.

"Kroger has been able to come close enough to Walmart's pricing structure to remain competitive, outperforming any of its industry peers," Merrefield wrote.

The price cuts were impressive because Kroger delivered them through largely unionized markets with high labor costs. If this is true it looks as if Kroger has reached a level of logistics efficiency that rivals that of Walmart. It's particularly bad news for dollar stores and Target (NYSE: TGT) which are having a hard time keeping up with Kroger's prices.

Merrefield a former Supermarket News editor, thinks that Kroger's private label brands are a secret to its success. He believes they position the grocer to complete with both upmarket stores like Whole Foods (NASDAQ: WFM) and bottom feeders like Aldi.

One person who has noted Kroger's recent success is Walmart CEO Rodney McMullen. Walmart should be particularly worried because Kroger has recently entered the Wisconsin market and is poised to enter some new regions including the Northeast, Florida and Minnesota. It is also a great position to increase its share of sales in existing markets like Denver and Southern California.

"We don't take Kroger's success for granted-not for a second," McMullen admitted. Investors should take note, Kroger and not Walmart is now the leader in the grocery segment.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.