• The [Northwest Arkansas] Morning News , Thursday, June 12, 2008 11 AM

Some Wal-Mart suppliers have had to accept lower prices in order to keep its business as the retailer tries to keep retail prices low, according to Citigroup analyst Deborah Weinswig. Manufacturers are willing to absorb price increases and take a lower margin in hopes that the large order size will help offset the squeeze.

Patricia Edwards, a fund manager with Wentworth, Hauser & Violich, agrees that there is "huge pressure" on suppliers to absorb price increases, but feels that trend may be changing as the burden becomes too large. That will mean that despite Wal-Mart's squeeze on suppliers and relentless focus on keeping prices down at the store, consumers will begin to shoulder more of burden as well.

But weak consumer spending trends mean that retailers can't pass off too much, and they have stepped up promotions. Wal-Mart announced Wednesday it would cut prices by as much as 40% on items geared to home "staycations," including a Bali Island patio set, Sanyo 50-inch plasma TV and iPod Shuffle. It is looking at other ways of keeping down costs, including local sourcing.

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