It’s Christmas in Fall for Wal-Mart

How do you ramp up sales when consumers are keeping a death grip on their
wallets? Simple: Let them put their purchases on layaway. This logic is what
Wal-Mart (NYSE: WMT ) is banking on with their announcement that, starting in
October, it will offer a layaway program on select merchandise. The layaway plan
is part of Wal-Mart's strategy to bring on the holidays early, and to get
customers to start coughing up cash well before the traditional Christmas
shopping season begins. The layaway program is the centerpiece of what can be
described as the retailer's "Christmas in fall" plans. The program, which
debuts Oct. 17, marks the return of layaway after a five-year absence from the
world's largest retailer. It also speaks volumes for the current state of the
struggling U.S. economy, as Wal-Mart now thinks a layaway plan is the path to
prosperity. Wal-Mart currently does offer layaway on jewelry, but customers soon
will be able to put items such as toys and electronics on the program. According
to the company, customers have to spend at least $50 to sign up for the new
layaway plan, and each item has to be priced at $15 or greater. For the
privilege of entering into this deferred payment agreement, customers will post
a $5 fee, put 10% of the purchase price down, then complete their payments and
pick up the items by Dec. 16. Of course, Wal-Mart isn't the only discount
retailer to offer layaway. Sears Holdings Corp. 's (NASDAQ: SHLD ) Kmart
division has been offering layaway plans for more than four decades, but given
the struggles it has experienced of late, the layaway plan doesn't seem to be
helping the company's bottom line. It also hasn't helped the stock much
SHLD is down almost 28% year to date. By contrast, WMT shares are up 4.8% so far
in a rough 2011 for equities. In addition to the layaway program, Wal-Mart plans
to cut prices on holiday items such as toys. It also plans to stock its shelves
early with a variety of seasonal items such as Christmas decorations. Last year,
the retailer removed many of its Christmas items in an attempt to streamline its
holiday assortment of goods. That plan didn't work, so now Wal-Mart is going
big and going early with its holiday fare. The move to bring back layaway, and
the plans to have Christmas in fall, could very well help the retailer's
bottom line. The company's same-store sales have struggled for nine straight
quarters, and although there was a turnaround in sales in July, Wal-Mart knows
it must take bold steps to get consumers to spend. If the plans work, WMT shares
could end up being one of the best retail values out there for investors. At the
time of publication, Jim Woods held no positions in any of the stocks mentioned
in this article.