Discounts help boost Wal-Mart, Costco May sales

Wal-Mart Stores Inc, the world's largest retailer, and Costco Wholesale Corp said May sales climbed more than analysts estimated as shoppers flocked to discount chains to save money on fuel and food.

Sales at stores open at least a year rose 3.9 percent, exceeding Wal-Mart's forecast, the discount retailer said yesterday in a statement. Costco reported a 9 percent gain.

Record gasoline prices hovering near $4 a gallon and rising costs for bread and milk have forced US consumers to shift spending, hurting retailers of fashion and home decor.

Limited Brands Inc, the owner of the Victoria's Secret lingerie chain, said that same-store sales fell 6 percent, while Gap Inc dropped 14 percent.

"We're halfway through the year and quite frankly, the pressures on the consumer seem to be worsening," Adrienne Tennant, a retail analyst at Friedman, Billing, Ramsey & Co in Arlington, Virginia, said.

"We thought that perhaps things would get a little bit better in 2008."

Teenage shoppers are starting to curtail purchases as employers eliminate part-time jobs and parents pare spending money, Tennant said. Shoppers who are spending on discretionary items are seeking lower-price destinations such as Wal-Mart and TJX Cos, the owner of the T.J. Maxx and Marshalls chains.

Wal-Mart, based in Bentonville, Arkansas, rose 1.5 percent to $58.55 at 8:16 am in trading before the New York Stock Exchange opened. The shares increased 21 percent this year before yesterday, compared with a 2.5 percent drop for the 30-company Standard & Poor's 500 Retailing Index.

Reliable destinations

"Wal-Mart is simply benefiting from the cost-conscious consumer," Russell Jones, the director of retail at AlixPartners LLP, said. "Consumers are cutting back on the number of destinations, and they're going to go to places they know they can rely on."

Sales of DVDs, video-games and pet supplies rose at Wal- Mart, while clothing fell, Wal-Mart said in a recorded message. Customer visits and their average purchase climbed during the month.

Wal-Mart had forecast a sales increase of as much as 2 percent. Analysts, on average, estimated a 1.5 percent gain, according to Swampscott, Massachusetts-based Retail Metrics Inc. Including fuel, Wal-Mart's sales climbed 4.4 percent, while its Sam's Clubs warehouse stores rose 6.5 percent.

At Costco, same-store sales jumped 7 percent in the United States and 15 percent at international locations. The increase for the whole company beat the 7 percent average estimate of 16 analysts.

Discounted fuel has drawn shoppers to Sam's Club and Issaquah, Washington-based Costco, which surveys local gas stations and then matches or beats their prices.

The average price of a gallon of unleaded gasoline reached a record $3.99 on Wednesday, according to the AAA motor club, 27 percent higher than a year ago.

Sears Holdings Corp and Rite Aid Corp have promoted giveaways tied to gasoline in an effort to lure shoppers. Sears is offering $75 gasoline gift cards to shoppers who buy $100 worth of men's Dockers merchandise from June 7-15, while Rite Aid is giving $30 gift cards and a chance to win a year's worth of free gasoline to customers who transfer prescriptions there.

Wal-Mart, grocer Kroger Co and RadioShack Corp are also offering promotions linked to the government's economic stimulus plan, through which more than 130 million US households are receiving tax-rebate checks.

"We're not really factoring a lot of benefit to retailers from it," Karen Ghaffari, a managing director at Fitch Ratings in New York, said.

The rebate checks are "going toward necessities".

May same-store sales probably increased 0.5 percent to 1.5 percent, the International Council of Shopping Centers said on Tuesday.

The New York trade group initially forecast a gain of about 2 percent, below last year's monthly increase of 2.5 percent.

Colder weather

Weather that was "colder than normal", also kept shoppers from spending, Tennant said. Last month was the coldest May since 2002, according to Planalytics Inc, a Wayne, Pennsylvania-based consulting firm.

Same-store sales at the Children's Place Retail Stores Inc rose 10 percent, more than triple the 2.9 percent Retail Metrics estimate.

Comparable sales are used to measure a retailer's performance because they exclude locations that have recently opened or closed.

Job cuts by US employers rose in May to the highest level in more than two years, Chicago-based placement firm Challenger, Gray & Christmas Inc said. The Labor Department may report today that the US lost jobs for a fifth straight month in May.

Sears Holdings and Macy's Inc, the two biggest US department-store chains, don't report monthly same-store sales.

Agencies

(China Daily 06/06/2008 page17)