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Wal-Mart expects big gains for holidays

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The nation has two kinds of retailers these days: those bracing for a grim holiday season, and Wal-Mart.

Sales at department stores and specialty retailers are in free fall. They are cutting staff, discounting merchandise and closing stores to survive. But even as the financial turmoil strangled discretionary spending at many stores, it sent struggling consumers into the arms of Wal-Mart — and left it, the world's largest retailer, poised for a blockbuster Christmas.

"In my mind, there is no doubt that this is Wal-Mart time," H. Lee Scott Jr., the company's president and chief executive, said recently at a meeting of analysts and investors in Wal-Mart's hometown, Bentonville, Ark. Referring to the discount chain's founder, he added, "This is the kind of environment that Sam Walton built this company for."

During the nation's last severe recession, in the early 1980s, Wal-Mart was mainly a regional chain in the Southeast with fewer than 300 stores. Old-line national discount chains like Woolworth's were fading into irrelevance, but nothing had risen to take their place.

In the subsequent quarter-century, Wal-Mart spread across the nation, opening some 4,000 stores. The company managed to burn its brand into the consciousness of virtually every American as the place to save money.

Now, as Americans cope with the worst economy in a generation, heading to Wal-Mart is an automatic reflex for many of them.

"We know that Mom's not going to cancel Christmas," said Stephen Quinn, Wal-Mart's chief marketing officer. "We're committed to cutting the cost of Christmas. It's what we do."

Wal-Mart's intention to outperform every other retailer this holiday season led it to open its Christmas shop, an area in its stores, in early October. The retailer also promised to have the lowest prices in the marketplace: Barbie dolls and Hot Wheels sets for $10, and packs of Christmas tree ornaments for $5.

All of the factors that analysts have identified as hurting October sales at most retailers — unemployment, declining stock prices, the credit crisis, dreary headlines — helped drive shoppers to discounters. In fact, while Wal-Mart is far and away the biggest retailer likely to benefit, some others could have gains for October, including BJ's Wholesale Club, Costco and Big Lots.