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Wal-Mart Seeks Head Start to Stave Off Grinch

The retailer bumps up its early holiday 'rollbacks' by 20% to lure in shoppers.
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SAN FRANCISCO -- Once again,

Wal-Mart

(WMT) - Get Report

has started the holiday season early by cutting prices on 15,000 items -- a 20% bump in its so-called rollbacks over last year.

The world's largest retailer started knocking down prices this week as part of an aggressive campaign to get a head start over its competitors, especially in a rocky retail climate that could prove especially promotion-heavy this year as chains try to drive traffic into their stores.

"In an effort to help stretch the dollar, we're giving customers an early start on holiday savings with even more targeted price cuts to come," said Wal-Mart's chief operating officer, Bill Simon, in a statement.

This latest round of reductions is centered mostly on household items like coffee makers, microwaves and toasters. The company plans to reveal more cuts on bigger-ticket items like electronics in the next few days.

Wal-Mart slashed prices earlier this month on its list of "Top 12 Toys for Christmas," reducing them to 50%.

The move keeps with Wal-Mart's traditional approach to the holidays, which is to get the season rolling before anyone else does. The difference this year is that many retailers, including Wal-Mart, are trudging through slow sales, hampered by larger economic issues and a housing slump.

Mark Husson, an analyst for HSBC, points out that Wal-Mart stores have the added problem of being located in relatively distant locations while gas prices hover in the $3-a-gallon range.

"However, it is 'taking arms against a sea of troubles' and hoping that, by using price, it may oppose the trend and beat it," he wrote in his latest research.

Husson adds that Wal-Mart may be feeling particularly emboldened to start the holiday season aggressively because of its recent margin improvement, even though its sales remain soft. Last week, the company

lifted its third-quarter earnings estimate to 68 cents to 69 cents a share from its previous forecast of 62 cents to 65 cents. Analysts polled by Thomson Financial expected earnings of 63 cents a share.

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Wal-Mart attributed the stronger margins to better expense controls. Husson points to increased sourcing for non-grocery items out of Asia.

While its bottom line may be improving, Wal-Mart posted only a 1.4% increase in September same-store sales, or sales at stores open at least a year. That came in at the lower end of its forecast for a 1% to 3% climb.

Other retailers experienced

similar weakness, but unlike Wal-Mart, several of them cut their profit forecasts. Among those with weaker views were top Wal-Mart rival

Target

(TGT) - Get Report

, and middle-market department store

J.C. Penney

(JCP) - Get Report

.

Husson doesn't expect too much reaction to Wal-Mart's price cuts from its competitors. Many have them have already mapped out their strategy for Black Friday, or the day after Thanksgiving, which marks the unofficial start to the holiday shopping season.

"Black Friday is a fairly well-orchestrated battle," he says. "Everyone's already moved their artillery. Wal-Mart was just the one to fire the first rounds."

Shares of Wal-Mart recently were down 3 cents to $45.96.