UPDATE 2-Wal-Mart customers delay buying necessities

Tue Oct 21, 2008 6:43pm EDT

Related Topics

* Wal-Mart U.S. CEO says customers worry about finances

* Wal-Mart says paycheck cycle intensifying

* Wal-Mart shares close down 1.4 percent (Adds details on credit trends, comment on holiday, byline)

By Lisa Baertlein

LOS ANGELES, Oct 21 (Reuters) - Wal-Mart Stores Inc's (WMT.N) U.S. customers, increasingly worried about their own financial security, are waiting until they get their paychecks to buy even the most basic necessities, the retailer's U.S. division head said on Tuesday.

Personal financial security, a recent poll revealed, was the No 1 concern for 80 percent of Wal-Mart shoppers, up from 65 percent a few months ago, said Eduardo Castro-Wright, president and chief executive of the Wal-Mart's U.S. operations.

And, in a "disturbing" trend, Castro-Wright said Wal-Mart for the first time is seeing a paycheck-related spike in sales of baby formula, suggesting consumers are rushing to buy such necessities as soon as they have the cash.

"Most consumers are worried about: 'Will I have enough to put food on the table so my family can eat?" he told attendees of a luncheon sponsored by Town Hall Los Angeles.

He said credit used as a form of payment at Wal-Mart is falling and that the decline is expected to reach into the double digits this year.

U.S. consumers have been cutting spending for months due to falling home values, job losses, higher prices for basics like food and fuel, and a global credit crisis.

Castro-Wright signaled earlier this year that easy access to credit was disappearing and forcing consumers to make changes in their purchasing habits.

On Tuesday he said that many consumers have "maxed out. Credit card limits don't allow them to use credit."

Castro-Wright declined to comment about the general economy. When asked about the holidays, he said: "Christmas is going to come .... consumers are just going to be more cautious."

As the economy worsens, Wal-Mart's customers have increasingly shown signs of living paycheck to paycheck.

Wal-Mart's sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers' budgets become more stressed.

In the last few months, the percentage of overall sales from the days surrounding those pay periods has risen 250 basis points, he said.

Shares in Wal-Mart closed down 1.4 percent to $53.67, off their year-high of $63.40 in September. (Reporting by Lisa Baertlein; editing by Gunna Dickson)

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