News of Asda’s Q1 results might cause suppliers - and rival retailers – to expect a ‘decisive’ price-cut response financed by Walmart, in these times of unprecedented moves by the mults.
However, joining a couple of extra dots could indicate otherwise.
For instance, comparing relative financials of Walmart and Asda could provide some clarity:
Walmart (2015) Results
Net Sales $482bn +1.9% YOY
Net Income $24bn
Net margin 5.1%
ROCE 17.9%
Asda (2013, latest results available at Companies House)
Net Margin 3.9%
ROCE 12.1%
Neither of these companies want to increase Walmart-Asda profit differentials...
Also, Walmart – and Asda – don’t do knee-jerk, so the response to the Q1 shortfall will be a price drop sufficient to 'restore order', but sustainable in the long term, and probably financed by the UK operation, meaning it will not be an over-the-top initiative.
That being the case, coupled with yesterday’s economic news of -0.1% ‘negative inflation’, could mean that we are in for a calm period of sustained flat-line demand…
…where growth will come at the expense of less-alert competition..
However, joining a couple of extra dots could indicate otherwise.
For instance, comparing relative financials of Walmart and Asda could provide some clarity:
Walmart (2015) Results
Net Sales $482bn +1.9% YOY
Net Income $24bn
Net margin 5.1%
ROCE 17.9%
Asda (2013, latest results available at Companies House)
Net Margin 3.9%
ROCE 12.1%
Neither of these companies want to increase Walmart-Asda profit differentials...
Also, Walmart – and Asda – don’t do knee-jerk, so the response to the Q1 shortfall will be a price drop sufficient to 'restore order', but sustainable in the long term, and probably financed by the UK operation, meaning it will not be an over-the-top initiative.
That being the case, coupled with yesterday’s economic news of -0.1% ‘negative inflation’, could mean that we are in for a calm period of sustained flat-line demand…
…where growth will come at the expense of less-alert competition..
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