Smart shopping: Many consumers seeking shelter from the economy at discounters
Low-price operators Costco Wholesale Corp., Wal-Mart Stores Inc. and TJX Cos. reported better-than-expected sales on Thursday, while traditional apparel chains J.C. Penney Co. and Limited Brands Inc. struggled.
"The smart shopper is in full bloom," said Craig R. Johnson, president of consultancy Customer Growth Partners. "They're looking to stretch their household budgets, and if you can get decent quality merchandise, why pay full price?"
"Smart shopping" is sweeping through all wage classes, analysts say, and it could spell trouble for retailers' profits and for the economy, too.
To lure customers, apparel chains are discounting more. First-quarter profits are slated to be down by 14.9 percent, according to Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. That compares to a projection in January of 5.3 percent profit growth.
Retailers' first quarter ended in April, and companies will start reporting their financial results next week.
He and other analysts expect only a modest rise in sales in May and June as consumers spend tax rebate checks that are starting to arrive.
"There's too much going on," in the economy, Perkins said. He and others expect shoppers to use the extra cash to pay down debt and catch up on utility and food bills.
That could be a disappointment for the Bush administration, which had hoped the checks would give the economy a much-needed lift.
Because of an extra shopping day last month compared to a year ago, the retail industry expected sales to rise in April.
The UBS-International Council of Shopping Centers retail sales tally for the month rose 3.6 percent. The figure surpassed the 2 percent growth estimate and marks the biggest gain since March 2007, when the index was up 5.9 percent. The April performance followed a 0.5 percent decline the previous month, the weakest March in 13 years.
Sales for the two months combined were a tepid 1.6 percent, in line with the average sales growth since the beginning of the industry's fiscal year.
The surprise, however, was the growing gap between discounters and traditional retailers.
Discount chains registered a 3 percent same-store sales gain, while wholesale clubs posted a 9.2 percent gain. Meanwhile, same-store sales at apparel chain stores fell 1.4 percent, according to the ICSC tally.
Except for Wal-Mart, whose shares rose 33 cents to $57.16, investors pushed many retailers' shares down Thursday. Penney's stock fell 2.41 percent, and Costco's shares lost more than 1 percent.
Recent comments
Always shopping for something new for less
They want cheap, 20...
Utahns | May 9, 2008 at 6:47 a.m.
Don't people have enough stuff that they can just stop buying...
Ronald A. Young | May 9, 2008 at 2:09 a.m.
Good to see more shoppers going for practicality rather than luxury...
Great | May 9, 2008 at 12:37 a.m.
