“Hard discounters”are retail formats that set retail food prices even lower than ex- isting discount formats, such as Walmart and Target. O¤ering limited assortments and focusing on store-brands, these formats promise to change the competitive landscape of food retailing. In this paper, we study the e¤ect of entry of one hard-discount format on markups earned by existing retail stores, focusing on several important grocery mar- kets across the Eastern U.S. Focusing on establishment-level pro…tability, we estimate store-level markups using the production-side approach of De Loecker and Warzynski (2012). We …nd that hard-discounter entry had the expected e¤ect of reducing margins from similar stores, but did not a¤ect markups earned by stores in the same market that are likely to appeal to a di¤erent market segment. In general, hard-discounter entry reduced markups for incumbment retailers by 7:3% relative to markups in non-entry markets. These results indicate that the net e¤ect of hard-discounter entry reduces the overall level of store pro…tability, regardless of higher sales realized by incumbent retailers.