Wal-Mart’s layaway program is back

Seeking to assist its core low-income shoppers and reverse a prolonged U.S. sales slump, Wal-Mart Stores Inc. is bringing back its layaway program for the key holiday shopping season.

The nation’s largest retailer said Thursday that it was reinstating the service, which it had discontinued five years ago because so few people took advantage of it anymore.

That mentality has changed amid a sluggish economy. Wal-Mart Chief Merchandising Officer Duncan Mac Naughton said customers had requested the return of layaway as a way to help them manage their budgets during the frenzied Christmas season.

“It just tells us that the customer is still struggling,” he said during a call with reporters. “There’s a fragile economy, and our customer needs our help.”

In particular, Mac Naughton said, the discount giant’s shoppers faced three major spending constraints: unemployment and job security woes; higher energy prices, especially for gas; and housing concerns tied to their mortgages and foreclosures. Layaway would help “relieve them of some of that near-term stress,” he said.

Under the terms of the new program, which begins Oct. 17, layaway items will be limited to toys and electronics, two of the most popular gift categories. Each item must cost at least $15, and a customer’s purchase total must be at least $50. Shoppers are required to make a 10% down payment and pay a $5 service fee; a $10 cancellation fee applies if the order isn’t paid in full and picked up by Dec. 16.

Popular during the Great Depression, layaway programs had all but faded away by the turn of the century as shoppers increasingly turned to credit cards to buy now and pay later.

But layaway has made a comeback since the most recent recession. The service enables shoppers to select their items early and pay off those purchases in a series of small payments; retailers hold the items during that time.

Wal-Mart’s announcement follows similar moves by rival chains in recent years.

Sears brought back layaway in 2008 after scrapping the service two decades earlier; and Toys R Us Inc. in 2009 introduced a layaway program. During the holidays last year, Kmart, one of the few retailers to consistently offer layaway, expanded its program.

Patrick McKeever, a retail analyst at MKM Partners, said retailers that offer the service have seen solid response from shoppers in recent years. He said he expected Wal-Mart’s program would drive some additional sales for the Bentonville, Ark., company. The retailer has struggled recently — last month it reported its ninth straight quarter of sales declines at U.S. stores open at least a year.

“If there’s any read-through to what Wal-Mart’s doing here, the customer needs that extra incentive it seems right now to spend,” McKeever said. “Generally speaking, I would say it’s a bit of a sign of the times.”

Wal-Mart said that it would honor any price reductions during the time an item was on layaway, and that layaway merchandise was eligible for the chain’s ad match program.

The upcoming holiday season is expected to be a cutthroat one as retailers vie for a limited number of consumer dollars.

Mac Naughton said that in addition to relaunching layaway, Wal-Mart would increase its holiday merchandise assortment; put out seasonal products two weeks earlier than usual; and offer special rollback prices on toys starting next week.

andrea.chang@latimes.com