Asda's 3.9% fall in like-for-likes - why Walmart won't go over the top...

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..