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Shoppers seek discounts

Costco shoppers buy a watermelon at Costco in Mountain View, Calif. Consumers gave some of the nation's retailers a little relief in April after months of dismal sales, gravitating toward less expensive discounters and wholesale clubs. (The Spokesman-Review)
Associated Press The Spokesman-Review
Costco shoppers buy a watermelon at Costco in Mountain View, Calif. Consumers gave some of the nation's retailers a little relief in April after months of dismal sales, gravitating toward less expensive discounters and wholesale clubs. (The Spokesman-Review)

NEW YORK – Caught in the maelstrom of higher gas and food prices, Americans – even more affluent ones – are seeking shelter in wholesale clubs and discount apparel chains.

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.

Retailers’ first quarter ended in April and companies will start reporting their financial results next week.

Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., expects only a modest rise in sales in May and June as consumers spend tax rebate checks that are starting to arrive.

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. 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.

Janet Hoffman, managing partner of the North American retail division of Accenture, was surprised to see that the April reports showed “a broader base of customers” switching to outlets.

A limping economy, soaring food and gas prices, limited credit, slumping home prices and worries about jobs continue to unnerve shoppers. Americans are gloomier about the economy than just before the U.S. invasion of Iraq in March 2003, according to a recent survey by the Conference Board, a business-backed research group

They’re even taking on more debt to pay for food and fuel. The Federal Reserve reported Wednesday that consumer borrowing, particularly on credit cards and auto loans, rose in March at the fastest pace in four months, more than double the increase of the previous month.

Eduardo Castro-Wright, Wal-Mart Stores U.S. president and CEO, said in a statement that the “economy continues to get tougher” and customers increasingly are unable to stretch their dollars to the next payday.

At an industry conference last week, the world’s largest retailer said that more affluent customers are shopping at its stores now. For Wal-Mart’s purposes, it considers shoppers with a household income of more than $55,000 affluent. It said it expects to keep those customers after the economy improves, too.