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Tax Rebates Spur Wal-Mart CE Sales

Wal-Mart is crediting the first wave of tax rebate checks for an uptick in sales of consumer electronics and air conditioners at its stores.

But while products like TVs, DVD players and video games may be benefiting from tax payers’ $39 billion bonanza, Wal-Mart acknowledged that it’s too early to tell whether the effect will be cumulative.

Short term, however, the world’s largest retailer appears to be tapping into the windfall by aggressively pursuing customers’ rebate dollars with a free check-cashing campaign.

“Wal-Mart has seen an immediate and direct benefit to sales in certain discretionary categories — concentrated in consumer electronics — resulting from customer use of tax rebate checks,” wrote UBS Warburg analyst Linda Kristiansen in a research note based on guidance from the retailer.

According to an initial sales analysis conducted by Wal-Mart, its customers are spending about 25 percent to 30 percent of their cashed rebate checks on store purchases, largely within the CE and AC sectors, the Bank of Tokyo-Mitsubishi reported.

Moreover, Moody’s Investors Service said it’s seeing early indications — based on chain store sales for the last week of July — that the rebates are having their desired effect: helping to boost consumer spending, which could help retailers and manufacturers work off excess inventory and get the economy back on track.

Wal-Mart, along with other major chains, has been vying for those discretionary dollars by offering to cash the rebates at no charge for consumers unwilling to wait for their checks to clear at the bank. Shoppers can also opt to have their checks converted to a pre-paid Wal-Mart shopping card.

No. 2 discounter Kmart upped the ante by offering a 5 percent bonus to customers who spend their entire rebate checks at the chain, although unlike Wal-Mart, it is unaware of a way to gauge the impact of the refund on sales, said chief executive Chuck Conaway.

Similarly, regional discount chain Ames Department Stores is offering customers a 10 percent discount on purchases made with rebate checks through Sept. 29, while The Home Depot is offering a six-month reprieve from interest and payments on purchases of up to $299 that are made on the company’s private label card. Dell Computer has also gotten into the act, linking the rebates to its back-to-school promotions by urging parents to spend the givebacks on high-tech learning tools.

But while Wal-Mart’s opening-price-point electronics may be percolating, CE specialty dealers are less certain that the $300 to $600 refunds will make a big difference when it comes to sales of bigger ticket bread-and-butter products.

“Most of the rebates will get spent,” allowed Ultimate Electronics president/chief operating officer Dave Workman. “It’s just enough that it’s a good amount to spend, and it’s hitting at back-to-school time.”

So, is Ultimate expecting a windfall? Not necessarily. “It could generate a DVD sale,” he said.