Wal-Mart to tweak layaway plan

Cash-strapped customers who rely on Wal-Mart Stores Inc. low prices year round are getting a little extra help from the retail giant this Christmas as the company’s layaway program has been extended by one full month.

“Last year, millions of Americans relied on layaway at Walmart to provide a great Christmas for their families. Because of their feedback, we’re offering the service again and making it better than ever,” said Duncan Mac Naughton, chief merchandising and marketing officer, Walmart U.S.

The layaway plan opens Sept. 16 and closes Dec. 14, which gives shoppers two extra pay check cycles and more time to stretch out their holiday expenditures. Mac Naughton said customers have asked for it and Wal-Mart delivered on more than just additional time.

The layaway fee was raised to $15 from $5 in 2011, but this year customers will receive a $15 gift card when they pick up their layaway, which covers the full fee charge.

Wal-Mart also expanded its list of eligible categories that will now include: small home appliances and select sporting goods such as basketball goals, trampolines and large exercise equipment, a broad selection of electronics, toys and jewelry.

While the eligible list has been expanded it still doesn’t include clothes, baby gear or tires as some customers had hoped. But for the most part, Wal-Mart’s decision to tweak it’s layaway plan has resonated well with customers on Facebook.

The retailer’s Facebook post garnered more than 75,300 Likes by mid afternoon Monday (Aug. 20).

Analysts who follow Wal-Mart and the broader retail segment were mixed on what this latest announcement signals as the retailer is often viewed a barometer for consumer sentiment and disposal income expenditures.

In Wal-Mart’s recent earnings call with analysts on Thursday (Aug. 16), CEO Mike Duke said Wal-Mart’s core customers were still facing challenging economic times.

“The paycheck cycle remains pronounced in the United States and in our International markets,” Duke said.

This was the first mention of the paycheck cycle in quite some time domestically, and Wal-Mart has never mentioned it internationally, according to CNBC retail analyst Courtney Reagan. Monday’s announcement again referred to the paycheck cycle and is geared to help shoppers stretch their budgets throughout the holiday season.

Stewart Samuel, analyst with IGD Services Inc., viewed Monday’s announcement as a positive move saying it comes from Wal-Mart’s position of strength.

“This is a strategic initiative by Wal-Mart to grab a greater share of their customers’ holiday spending,” Samuel said.

He expects the program to be more popular with shoppers than in recent years because of the added time and fee refund.

“The trading environment remains challenging and this should provide an early boost to holiday sales, potentially ahead of some of its competitors. The layaway initiative was a great success for the retailer last year, helping to drive stronger traffic and sales and Wal-Mart will be looking to repeat this performance this year," Samuel explained.

Burt Flickinger, managing director at Strategic Resource Group, isn’t so sure it’s a positive signal. He expects a challenging retail environment overall with tough competition from Target, Costco, Amazon and Apple.

Flickinger told CNBC on Monday the Wal-Mart move is also about capitalizing on competitive chaos at Best Buy who selected hospitality executive Hurbert Joly to turn the electronic retailer’s business around.

A looming problem for retailers according to Flickinger, is tepid consumer spending among the 16 states with strong ties to agriculture given the ongoing drought. He said Wal-Mart has a lot of stores in these states as do other retailers.

His estimates fourth quarter retail sales growth at 1% to 2% from brick and mortar stores, and low to mid-double digit gains for online retailers like Amazon, that still have a tax advantage in a number of states. He said this 16-state region was responsible for the majority of sales growth in 2010 and 2011, but now fears that won’t be the case in 2012 as financial losses escalate amid the agriculture sector.

The National Retail Federation expects low single digit sales growth in the fourth quarter and that includes Wal-Mart.

Sucharita Mulpuru, retail analyst with Forrester Research, believes Wal-Mart’s layaway news will help the low cost retailer capture a little more wallet-share early. She wasn’t surprised by the move to tweak the program given it had good success last year because that’s what retailer’s often do.

Mulpuru says this strategy to eliminate the fee and give shoppers more time to pay out their holiday purchases fits within Wal-Mart’s core strategies and that’s all she’s reading into the announcement.