UPDATE 4-Wal-Mart says will price to win this holiday season

* Says to cut holiday season prices, lead in entertainment

* To introduce new U.S. formats, put money in remodels

* Company declines to provide update on same-store sales

* Shares close down 2.1 pct at $50.63, Amazon down 1.6 pct (Adds company comment on Project Impact)

SAN FRANCISCO, Oct 21 - Wal-Mart Stores Inc will slash prices each week this holiday season as the discount retailer fights off rivals and strives to keep its newly won market share this holiday shopping season.

Shares in the world's largest retailer fell more than 2 percent after it pledged "hundreds of millions of dollars in price reductions" and raised investor concerns over its ability to protect margins.

The aggressive strategy, announced at its analyst meeting on Wednesday, pressured shares of rivals including grocery stores like Safeway Inc, discount retailers like Dollar Tree and Family Dollar Stores Inc, and online leaders like Amazon.com.

"I am competitive by nature and I want to win," said CEO Mike Duke in his opening remarks. "There is no doubt in my mind that Wal-Mart will continue to win in retailing all around the world."

Safeway shed 4.1 percent, Amazon declined 1.6 percent and Dollar Tree fell 3.4 percent.

Joseph Feldman, a retail analyst with Telsey Advisory Group, said worries over Wal-Mart's gross margin were likely pressuring its shares.

"Some people have been a little frustrated," he said. "You're the leader, but at what cost?"

He also said there was some disappointment that Wal-Mart did not comment on its U.S. same-store sales, or sales at stores open at least a year. Earlier this year, it stopped reporting those numbers on a monthly basis.

PRICES CUT ON TOYS, BOOKS, MORE

Wal-Mart has already rolled out aggressive price cuts ahead of the 2009 holiday season. It is offering more than 100 toys for $10 each and it has cut prices on highly anticipated hardcover books by 60 percent or more, igniting a price-cutting war. ID:nN16185089

Wal-Mart intends to be the price leader in entertainment products this holiday season, said John Fleming, chief merchandising officer for the company's Walmart U.S. business.

Fleming said that the holiday season would be "tough" with customers delaying purchases until later in the season, but he said he liked Wal-Mart's chances.

Wal-Mart also gave an update on its efforts to boost U.S. sales by remodeling stores under its "Project Impact" initiative. It is widening aisles, clearing its shelves of slow selling merchandise and stocking more brand name or exclusive items, like a clothing line by pop-rock singer Miley Cyrus.

Eduardo Castro-Wright, who oversees Wal-Mart's U.S. operations, said sales in "Project Impact" stores are outpacing those of a control group, although gross margins are flat.

Executives attributed that flat performance to disruptions as customers become familiar with the new format and as it marks down prices on items it no longer plans to sell. Gross margins should improve, it said, as customers in those stores buy higher-margin products, like clothes or home goods.

Castro-Wright also said Wal-Mart is retaining new customers who are shopping more frequently and across the entire store.

Wal-Mart has seen an increase in higher-income shoppers coming to its stores during the recession. Wal-Mart said that in February, 17 percent of traffic growth in its U.S. stores came from new households and the majority of those households had annual income of more than $50,000.

ROOM TO GROW AT HOME AND OVERSEAS

Duke kicked off the two-day analysts' event that ends on Thursday by telling Wall Street that the world's largest retailer has more room to grow, both at home and internationally.

Duke said the company's expenses should grow less than sales. He said that Wal-Mart would work to improve its expense structure by driving more productivity and efficiency.

In the United States, it will put more money toward remodeling stores to retain shoppers and said it will look to open smaller stores in new markets. It is also working to make its store operations and systems more efficient, so it can use cost savings to lower prices.

Internationally, it plans to grow through acquisitions and by expanding existing operations. While Wal-Mart has expressed interest in entering Russia, it said that at this point, it makes sense to continue to study the market.

Last week, French retailer Carrefour said it was pulling out of Russia only four months after gaining a foothold there. Carrefour said it saw little growth and acquisition prospects in Russia -- where it previously aimed to be the third biggest player in the long term. ID:nLF662106