Twice a year Walmart resets all the toys (periodically they send additional updates, but nothing major). Those times of year are February & August. 30 days before they changeover you can view the Addition & Deletion list. This list says everything going to be added and deleted to/from the shelves. When this happens stores are encouraged to identify the newly deleted items and mark them down 10% at the store level. They are "supposed" to be left in the section they belong (called the home from here on) until the changeover happens.
Shortly before the changeover the home office will then send price changes for the deleted items. Because the number of price changes number in the thousands, they usually download them over the course of a week. Dept managers are supposed to make the changes within 48 hours. many times they don't sometimes days or weeks pass by.
Stores didn't proactively markdown the deleted items will be sitting on higher quantities and will likely see additional home office markdowns (usually no more than 3 total markdowns at the home office level).
The small updates I mentioned above are why you see a random item suddenly show up in clearance. For example say Lego releases a product line too late for the February changeover but all they can have it on the shelf in April. Sure enough April will roll around and a update comes through. Everything I said above applies to these updates
Walmart likely ordered the Millennium Falcon for all stores before Christmas knowing a $150 item would only sell in select stores after Christmas. Once the changeover occurred it got the axe in many stores. I never saw a $35 Falcon but the fact that everyone saw the same $35 tells me it was a home office markdown. I am not sure if it saw multiple drops or went straight to $35. The Spaceport is a similar concept which went to $89, $59 and then $30. Walmart just wants what it views dead inventory gone.
From our standpoint we see a $150 awesome item for $35. Walmart sees a big boxed item that won't sell taking up space of something that will sell. It also doesn't want these items taking up its valuable backroom space. This past year Walmart did the same thing with the Meccano Mechanoid robot. A $159 item ended up at $40. In my opinion since the new CEO took over we have seen faster and lower clearance prices. It seems like they are actually trying to move out old inventory.
Individual Store Price Changes
The above covers what is supposed to happen, now I will address a few good and bad things stores do.
Each store is allotted a certain amount of money for in-store markdowns (not home office changes). It is up to the store manager how this money is spent. Some store managers don't want to spend it since it counts against the bottom line. So when a changeover occurs they ignore the 10% markdown idea, they wait for the home office price change to come which doesn't count against the bottom line.This is why some stores have clearance with only a $.02 discount (or even $.01).
Some stores go the opposite direction, 30 days ahead of the changeover they do 10%, then each week or every other week they will do an additional amount. Problem for us investors these stores usually never have much for big markdowns since they methodically marked down the items. It would have sold at the 10,20 or 30% off. Nothing is left for a second or third home office markdown.
Some stores ignore the 10% thing and just start marking down clearance to whatever the feel like. These are the stores that cause us all the confusion but provide the best deals. They strictly want freight gone. You will notice the biggest markdowns are literally on the biggest boxes.
The general rule is department managers are supposed to take care of their own clearance merchandise. Some stores have one person in charge of clearance. You can usually tell the difference by how well organized it is and how often the markdowns are down. Department managers have other priorities, they often neglect to change prices or even bother with clearance.
Sometimes a one shot cardboard display will arrive (usually on a pallet). They call this a feature, it comes in deleted. Some stores mistakenly immediately clearance it. Other stores may actually carry a few of the items. Last fall there was one of these for Lego Friends. Some of the items stores carried, some didn't. Since this was a feature, there wouldn't be any home office markdowns to get rid of it. Any price changes were at the store level.
While we all think Walmart could make more money by dropping prices slower and certain items, they aren't collectors. They strictly look at moving through product and getting something in that will sell. Saving $1000 by slowly selling Legos and jamming up clearance sections and backrooms while waiting for them to sell is not their model. The average Walmart does $70-110 million a year, they have bigger fish to worry about than clearance. The headaches associated with clearance are not worth the extra money in slowing down the sales to get every cent of profit. Ever seen the items that have been in clearance for months, they are damaged, ripped or open. Walmart get no credit if these get claimed out (aside from a tax credit).