• Time, Monday, March 22, 2010 10:54 AM

Wal-Mart may have gone a bit overboard in the implementation of its "Project Impact" plan which, combined with food deflation, has led to the third straight quarter the store saw negative same-store sales growth. But it has plans to reverse the trend, Sean Gregory reports.

When the company reduced the number of brands and package sizes in its grocery section, it suffered two consequences. Some shoppers retreated to neighborhood supermarkets or dollar stores for staples. And the brands that were booted from Walmart shelves decided they had nothing lose by competing with the Bentonville Behemoth on price.

Now, the company is returning about 300 discontinued items to the shelves in one effort to lure back customers. It's also "lacing up the gloves" in the price war, says Citigroup analyst Deborah Weinswig. For example, a two-liter bottle of Coke that recently sold at a New York-area Walmart for $1.58 has been cut to 98 cents. "That's 'wow' pricing," says Weinswig, "and you'll think twice about going somewhere else."

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