Wal-Mart sees shifts in shoppers' buying habits

Financial insecurity is forcing Wal-Mart wmtshoppers to change buying habits, cut credit card use and live more paycheck-to-paycheck, the CEO of the U.S. division of the world's largest retailer said Tuesday.

Economic pain is leading to what Eduardo Castro-Wright termed "disturbing behaviors" among shoppers over the past few months.

For instance, more families are buying baby formula at the start of the month when they are more likely to have money. In the past, he said, the chain hadn't noticed such surges in formula sales.

A double-digit decline in credit card use at Wal-Mart stores in the second quarter this year sharply contrasts with the first quarter of 2007, when a vibrant economy was resulting in double-digit increases in card use.

"Credit has been declining dramatically," said the Ecuador-born executive who has run Wal-Mart Stores USA for three years. "That decline in credit means people have to make choices about how they spend their hard-earned money."

Many don't have a choice when it comes to their form of payment.

"They have maxed out on their credit limits," Castro-Wright said in an interview after a speech to Town Hall Los Angeles, a non-profit that provides a forum for public figures and opinion makers. "Customers are really going through some hard times."

The observations are significant because of Wal-Mart's massive scope, with 4,000 U.S. stores. Castro-Wright said nine out of 10 American families shop at Wal-Mart at least once a year.

How financial hurt is showing:

•Money worries. About 80% of shoppers cite "personal financial security" as their top concern in internal surveys, up from 65% just a few months earlier, he said. A year ago, the price of gasoline was the top concern.

More consumers worry: "Will I have enough to put on the table so my family can eat?" Castro-Wright added.

•Fewer name brands. Wal-Mart has seen a rise in purchases of staples instead of discretionary items. Shoppers have more then doubled purchases of private-label items, eschewing name brands. Castro-Wright said, however, that Wal-Mart has no immediate plans to change the stores' merchandise mix to take advantage of the trend.

•Changing shopping patterns. Some shoppers aren't coming to the stores as often so they don't have to drive as much. Others, who may be unemployed, are coming more frequently to buy a few items when they have money in their pockets, he said.

And more sales are showing up around paydays. Wal-Mart has seen a 2.5% increase in sales at the start and the middle of the month, when workers are paid, compared with four months ago.

Wal-Mart is responding to slower growth by cutting back on capital investment and not opening as many new stores.

He also pointed to the chain's program to sell generic prescription drugs at $4, which he said has saved some of the neediest consumers more than $1 billion.

He also pledged that Wal-Mart won't cut back on philanthropic spending this year, though other corporations may be forced to reduce their charitable donations.

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