Wal-Mart's rebound puts holiday pressure on rivals

Thu Dec 8, 2011 5:33pm EST
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By Jessica Wohl

NEW YORK (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote) is having a jolly holiday season, which means rival retailers might find lumps of coal in their stockings this Christmas.

This year, the revival taking place at thousands of Walmart U.S. stores is chipping away at the momentum its competitors gained over the past two holiday seasons, when the giant retailer lost its footing.

Target Corp (TGT.N: Quote), in particular, is already feeling the pressure. Its toy sales were lackluster after Walmart brought back a layaway plan for budget-conscious shoppers even before the holiday season began in earnest.

Walmart has lauded the return of layaway, which for a fee, allows shoppers to pay for purchases over time as the store holds onto them. The strategy is targeted at the retailer's core customers, who make between $30,000 and $60,000 a year and remain under economic pressure.

"Quite frankly, I think we brought Christmas to some families that may not have been able to have that without the layaway program," Walmart Chief Merchandising Officer Duncan Mac Naughton said at a Credit Suisse conference on Thursday.

Walmart started to skid more than two years ago, when the chain cleaned up its messy aisles and stopped selling thousands of items such as some fishing and sewing gear.

The move backfired as shoppers flocked elsewhere. The Bentonville, Arkansas, company committed to reversing its slump this year, bringing back goods and overhauling how it tracks whether items are in stock. It finally ended its nine-quarter streak of declines in sales at stores open at least a year, or same-store sales, in the third quarter.

"It has gone back to basics, sharpened its prices and overall (it is) a much improved business," said Gilford Securities analyst Bernard Sosnick.   Continued...