Wal-Mart Stores Inc. plans to roll out sophisticated electronic ID tags to track individual pairs of jeans and underwear, the first step in a system that advocates say better controls inventory but some critics say raises privacy concerns.

Starting next month, the retailer will place removable "smart tags" on individual garments that can be read by a hand-held scanner. Wal-Mart workers will be able to quickly learn, for instance, which size of Wrangler jeans is missing, with the aim of ensuring shelves are optimally stocked...