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.