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Wal-Mart: Have yourself a practical Christmas

The new president and CEO of Wal-Mart's U.S. business is predicting that practical thinking about needs and prices will drive shoppers and gift trends this holiday season.
/ Source: The Associated Press

If Wal-Mart is right, Americans will be inundated with undergarments this holiday season.

The new president and CEO of the world's largest retailer's U.S. business says prices and practical thinking will drive shoppers as they look for gifts. And he plans to be prepared.

"Our customers remain challenged," the executive, Bill Simon, said Wednesday at a Goldman Sachs retail industry conference. "So for all you adults, you should plan for socks and underwear."

For children, the chain is focusing on hot toys and electronics, he said.

Simon aims to reverse five straight quarters of declining revenue at stores open at least a year, a key measure of retailers' health.

It could be an especially challenging holiday season, given that Wal-Mart shoppers facing tight budgets delayed their back-to-school purchases even longer than last year — many waiting to spend until after school started, Simon told analysts in the webcast address.

"Much of the back-to-school (business) actually happened after the event, as customers sort of shunned the school list, waited until school started and found out what they really needed and then came in and shopped," he said.

"We expect a very, very competitive and aggressive Christmas and holiday selling season," he added.

Wal-Mart benefited during the recession as affluent shoppers traded down to cheaper stores. But stubbornly high unemployment and tight credit are still squeezing its main U.S. customers, lower-income workers who are having even more trouble stretching their dollars to the next payday because of tight credit and an unemployment rate stuck at almost 10 percent.

But the discounter's own merchandising gaffes have contributed to the revenue figure's decline.

Simon, who was appointed in June, has accelerated Wal-Mart's effort to restore items it cut last year, and he's leading a move away from steep rollbacks after they failed to excite frugal shoppers last spring. He told analysts he has been spending time with suppliers and Wal-Mart board members to "understand where we can be better."

And then there are the underwear and socks.

"We are moving forward building on what worked," Simon said.

But he told analysts it will take a while to fix merchandise assortments.

"We are in the process of reviewing billions of items," said Simon, noting that even recent remodels that reflected the lean inventory strategy must be rethought.

Wal-Mart will offer a capital spending plan at its annual analysts' meeting next month.

And its strategy remains in flux amid management shuffling.

Simon took over leadership of U.S. business from Eduardo Castro-Wright, who now leads the retailer's e-commerce unit,, and its global sourcing division. Castro-Wright remains vice chairman of the company.

On Aug. 1, the company's chief merchandiser, John Fleming, left the company after 10 years. Wal-Mart announced last week that four existing executives would split his duties, reporting to Simon.

"This will allow us to make the merchandising changes as quickly as possible," Simon said Wednesday, reiterating Wal-Mart's forecast that its revenue at stores open at least a year will start rising by the fourth quarter.

Simon said Wal-Mart customers' spending gets very volatile around the first of each month, with big drops in the days ahead, followed by an uptick at midnight on paydays, when government assistance checks are deposited electronically into recipients' accounts.

In the hour before midnight each month, shoppers load their carts with baby formula and other basics like milk and bread and then line up at the checkout, ready to pay as soon as the money becomes available, Simon said.

"If you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it and they've been waiting for it," said Simon. "We have a commitment to serve those customers who need that. And we are very, very focused on that."

Walmart stores also are stocking a variety of items in smaller packages to help customers counting pennies in the days leading up to the first of each month, he said, but they're also bringing in bigger sizes for the days after the first of the month when shoppers have a little more money.