Dec. 7 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, is getting back into the Christmas spirit.

Two years ago, the discount chain substituted the word ``holiday'' for Christmas references and encouraged store greeters to do the same, in line with other retailers' removal of ``Christmas'' from advertising and stores.

Now, after criticism from religious groups, Wal-Mart is getting back in the spirit. For the first time, the Bentonville, Arkansas-based merchant is bringing Santas into its 3,407 stores. And, following an experiment at a few locations last year, the retailer has set up a ``Christmas Shop'' in each of its 1,500 outlets with garden centers.

``This is still a nation where the majority of the people consider themselves Christian,'' said Patricia Edwards, a Seattle-based portfolio manager at Wentworth, Hauser & Violich, with $13.4 billion in assets including Wal-Mart shares.

Last month, Lowe's Cos., the Mooresville, North Carolina, home-improvement chain, apologized for referring to ``Family Trees'' instead of Christmas trees in a catalog.

Today, Wal-Mart is broadcasting a Christmas concert it produced by the Salvation Army brass band and its own choir that will air in stores along with remarks from Pastor Rick Warren, author of ``The Purpose Driven Life.''

The chain is also offering photos free of charge with a Santa Claus in stores on weekends through Dec. 9. For families who can't afford pictures with department-store and shopping- mall Santas, the photos are ``absolutely a huge traffic draw,'' Edwards said.

Seeking Shoppers

Retailers are vying to draw shoppers burdened by defaults on mortgages and higher food and fuel costs. Customer visits this year have declined at Wal-Mart compared with 2006.

Wal-Mart fell 25 cents to $49.02 at 4:01 p.m. in New York Stock Exchange composite trading. The shares gained 6.1 percent this year, compared with an 11 percent decline for the Standard & Poor's 500 Retailing Index.

Wal-Mart's shoppers were ``loud and clear'' that they wanted more references to Christmas, spokeswoman Christi Gallagher said. ``It's really just a direct response to what our customers have told us'' in comments to store managers and on the company's toll-free phone number, she said.

Wal-Mart resumed using the word ``Christmas'' in stores and advertising in 2006, a year after the Catholic League for Religious and Civil Rights started a boycott in response to the retailer's approach to the holiday. The boycott ended after one day following an apology from the company, according to the New York group's Web site.

Good Will

Bringing Santas into its stores this year can generate good will that might boost sales, said Burt Flickinger, managing director at Strategic Resource Group in New York.

Wal-Mart yesterday said sales at stores open at least 12 months rose 1.4 percent this year through Nov. 30.

``Hopefully Santa can help the situation, because not much else seems to be working for the boys down in Bentonville,'' said Flickinger, who said he owns shares.

Comparable-store sales are considered a key gauge of retail performance because they track only results from established locations.

Wal-Mart's Gallagher said she wasn't aware of any negative reaction to the changes.

``The message that we're giving to spread Christmas in the stores is one that really resonates with all our shoppers, regardless of religious affiliation,'' she said.

Threatened Boycott

The American Family Association was among conservative groups that last year threatened a boycott of Wal-Mart stores following Thanksgiving and after the retailer joined the National Gay and Lesbian Chamber of Commerce.

The AFA, based in Tupelo, Mississippi, canceled the boycott after Wal-Mart said it wouldn't make contributions to ``highly controversial'' groups or issues. The AFA has also assailed retailers, including Wal-Mart, for omitting the mention of Christmas in stores and marketing.

This year the AFA turned its attention to Lowe's, the second-largest home improvement chain.

Lowe's received 119,000 e-mails last month after the AFA posted a message to members urging them to protest the retailer's use of the phrase ``Family Trees'' in a catalog, said Karen Cobb, a company spokeswoman.

Lowe's has always used Christmas in its marketing and wasn't trying to depart from that policy, Cobb said. Lowe's issued an apology.

``It was not our intention to try and be politically correct or to try to take the significance of Christ out of Christmas,'' she said.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

Last Updated: December 7, 2007 18:36 EST