The value wars are back as big brands cut prices amid tariffs

Axios

4 hours ago

Parts of corporate America are swallowing margins to keep people spending.
Why it matters: Chains like McDonald's, Target, Kohl's and Pizza Hut are slashing certain prices, expanding deals and leaning on subsidies — early proof that brands are willing to trade profit for traffic.
The "value wars" are back as tariffs threaten to push broader prices higher and cash-strapped households pull back.
Driving the news: Target is leaning harder into low-price private store brands and keeping the $1/$3/$5 front-of-store value bin prices as it retools merchandising, executives said Wednesday. The Minneapolis-based retailer also announced a CEO succession plan.
McDonald's is rolling out nationwide combo meal discounts in September, subsidizing franchisees to cut prices by 15% on eight meals and reviving an expanded value menu, the Wall Street Journal reports.
Kohl's is reversing years of coupon exclusions, expanding the brands eligible for discounts to woo frustrated shoppers and drive store traffic.
And Pizza Hut is launching $5 "Crafted Flatzz" before 5pm, while Olive Garden is reviving its Never Ending Pasta Bowl at the same price since 2022.
The big picture: Lower-income households are disproportionately trading down or pausing spend, forcing companies that drifted upmarket during the inflation surge to reset price points and reposition value.
Between the lines: Deep deals can ding profit margins, but chains are betting sharper entry prices will rebuild traffic and checkouts.
McDonald's subsidies highlight how far brands will go to reset "affordability" perceptions.
Target's "last resort" pricing stance shows retailers will squeeze suppliers, change assortments and lean on private-label mix before passing along tariff pain.
What they're saying: "Consumers remained very hard-pressed in terms of finances, so they are seeking value and sharp pricing to make their dollars stretch further," GlobalData managing director Neil Saunders tells Axios.
Saunders said companies are responding with price cuts, sales and more deals, which can move the deal and drive volume.
"Offering more value options on the menu is a way of course correcting," Saunders said, noting McDonald's went from a cheap fast food fix to a relatively expensive purchase for a family.
Rick Gomez, Target's chief commercial officer and executive vice president, said during an earnings call Wednesday that consumers are looking to stretch their budgets, "navigate inflation and uncertainty around tariffs."
Yes, but: Deals won't be found everywhere. Some brands are openly passing along tariffs in the form of higher prices.
Estée Lauder CFO Akhil Shrivastava said Wednesday the beauty brand is weighing increases.
Sony announced Wednesday that it will raise prices of its PlayStation 5 console in the U.S. by about $50 starting Thursday as it faces higher costs.
Wha we're watching: Walmart, the world's largest retailer, announces its quarterly earnings Thursday.