Uh-oh.

Walmart Stores Inc. (WMT) - Get Report has lately been one of retail's big winners, as it has largely proven resistant to the growing threat of e-commerce shopping. That may soon come to an end.

In a research note published on Thursday, June 29, Wolfe Research analysts Scott Mushkin and Michael Otway said the expansion of German discount grocers ALDI and Lidl in the U.S. has left them "increasingly concerned" about the future of staples retailers, "particularly Walmart."

"Our store visits and analysis highlighted significant price compression in private-label pricing, aggressive prices in the all-important customer traffic-driving fresh food areas and even lower branded prices, too," Mushkin and Otway wrote.

Wolfe found that Walmart lowered its prices by more than 20% at certain stores in Virginia Beach and North Carolina, where Lidl now has a presence. In Connecticut, where Lidl has not yet set foot, Walmart prices remained the same.

"Not only are we seeing private-label compression but Virginia Beach is also showing further pressure on branded items, something we believe will likely accelerate as private-label pricing collapses further," Mushkin and Otway wrote. "Our concerns regarding Walmart are mounting."

Wolfe wrote also that on some fresh food items, it believes Walmart is selling below cost.

As a result, Wolfe reiterated its market underweight ratings on Walmart, and gave the same to Target Corp. (TGT) - Get Report , Dollar General Corp. (DG) - Get Report and Kroger Co. (KR) - Get Report .

Kroger CFO Michael Schlotman recently brushed off Lidl as a serious threat to the rival discount grocer's business, going as far as to say he is "glad their stores are finally open."

On June 15, Lidl opened its first 20 stores in the U.S., in Virginia, North Carolina and South Carolina. Four of those stores are within one mile of a Kroger location, according to Oppenheimer analyst Rupesh Parikh.

In response to Lidl's grand opening, Kroger marked down many of its prices at stores near the German grocer, including on a half-gallon carton of milk, which now goes for 99 cents in those locations compared to $1.29 in others.

Last year, Walmart began driving a major private-label push, spanning everything from frozen food to beer.

Walmart's shares rose 0.2% to $76.05 on Monday morning.

Read more of today's top business news here.

Editor's Pick: Originally published June 29.

Read More Trending Articles: