When the left hand and the right hand don’t talk to each other, unintended consequences arise. Last week Walmart instituted a price war with Amazon that is shaking publishing. Price wars scare investors because reduced revenues mean reduced dividends.

The threat is great enough that Wall Street has taken notice and made nice-nice noises to sooth the volatile investor.

From Market Beat:

Recent comments from Wal-Mart, which holds analyst meetings next week, suggest that it doesn’t plan for gross margin improvement over a long-term horizon, but Credit Suisse thinks that reflects a number of issues other than price cuts, for instance, rising food and private-label sales

If margin remains steady or even declines slightly, then volume has to rise to compensate or shareholders will start looking elsewhere. The challenge for Walmart is that it has saturated its markets and continues to have difficulty expanding.

And Credit Suisse thinks the company will remain rational?

Jeff Hess: Have Coffee Will Write.

This entry was posted on Monday, October 19th, 2009 at 1046 by Jeff Hess and is filed under Walmart. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.