Wal-Mart cuts staple food prices in Ontario

Fri Aug 29, 2008 4:04pm EDT
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By Susan Taylor

OTTAWA (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote) said on Friday it would cut prices on bread, milk, butter and eggs in the province of Ontario, where the economy has been struggling, putting pressure on its rivals.

The discount retailer said price cuts of up to 35 percent on staple foods in some locations would help consumers in the heavily industrialized province, which has been hit hard by high oil prices and the U.S. economic slowdown.

As Wal-Mart expands food sales in Canada, grocers such as Loblaw Companies Ltd (L.TO: Quote), the country's biggest supermarket chain, have been cutting prices to try and keep customers.

That strategy has already pinched profits for the sector.

"It's further intensification of the same pressures in this sector so it will continue to impact the usual suspects," said Anil Passi, analyst at credit rating agency DBRS.

Loblaw has been affected most by Wal-Mart's push into the grocery business, followed by Metro Inc MRUa.TO, Canada's No. 3 grocer, Passi said.

Loblaw shares were down 1.1 percent late in Friday's Toronto Stock Exchange session, while Metro was down 0.5 percent and Empire Co Ltd (EMPa.TO: Quote), which owns No. 2 grocer Sobeys, was down 1 percent.

Starting Friday, Wal-Mart's Ontario stores will carry standard lower prices on the staples, reversing a flexible pricing policy. Of its 104 stores in the province, 22 are super-centers with a broad range of groceries, with the remaining traditional stores carrying a more basic selection.   Continued...

<p>A customer shops at a Wal-Mart Supercenter in Rogers, Arkansas June 5, 2008. REUTERS/Jessica Rinaldi</p>