Retail

Toy Scare Could Help Wal-Mart

For some time now, Wal-Mart's tried to juice sales by peddling high-ticket goods. The company's wish may finally be coming true--thanks to consumer nervousness over lead-tainted toys.

Concerned parents still need to find something to put under the tree amid the lead fears. That means higher-priced electronics and sporting goods.

"The growth in electronic purchases is a bonus for Wal-Mart as they generate high-average tickets," says Britt Beemer, president of America's Research Group, which tracks consumer behavior.

Surveying Wal-Mart (nyse: WMT - news - people ) shoppers during the first weekend in December, America's Research Group found that 32% planned to buy electronic goods at the store this year, compared to 20% that did so in 2006. About twice as many as last year said they were shopping for sporting goods (11.3% vs. 5.7%).

Those gains come mostly at the expense of toys, which polled at 37% vs. 39% a year ago, and children's clothing, which dropped all the way down to 10% from 18% last year.

On Wednesday, the Michigan-based Ecology Center put out a report saying that 35% of 1,268 toys tested showed traces of lead paint. About half of those, the report said, had levels high enough to trigger a recall. The Toy Industry Associated disputed the report, questioning the Center's testing procedures.

No matter who's right, parents will err on the side of protecting their children. This year's theme is non-chewable gifts for kids, which means more videogames and baseball bats and fewer small toys and shirt sleeves that can go into their mouths.

That hurts a company like Toys 'R' Us, one of the featured retailers in the Ecology Center's toy-testing laboratory. But it's just fine for Wal-Mart (also a major seller of the Center's test sample), where customers can just slide over to another section of the store to find Christmas gifts.

Already coming off a better-than-expected third quarter in which it grew earnings 8% from a year earlier, the Bentonville, Ark.-based Wal-Mart seems well positioned to improve on last year's miniscule 1.5% rise in same-store sales for the November-through-January holiday period.

"They've returned to price leadership," says Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consultancy.

Wal-Mart plans to keep a steadier flow of customer traffic this year by planning out an early discounting season rather than waiting until mid-December to clear out slow-moving merchandise. Consumers' acceptance of Wal-Mart's flat-screen TVs and other expensive gizmos is a stark contrast to their rejection of its higher-end clothing. No one wants to say they buy their clothes at Wal-Mart, but anyone will get a Sony there.

"That's why Circuit City and Radio Shack are closing so many stores," Davidowitz says.

And with more people ambling over from the toy department, the season could be a little bit jollier in Bentonville this year.