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 yesterday, while traditional apparel chains J.C. Penney Co. Inc. 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 per cent, according to Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. Companies will start reporting their financial results next week.
"Consumers are focusing on value and price points and stretching their dollars," said Mr. Perkins. "They are feeling the pinch on multiple fronts."
Because of an extra shopping day last month compared to a year ago, the retail industry expected sales to rise in April. The surprise, however, was the growing gap between discounters and traditional retailers.
Discount chains registered a 3-per-cent same-store sales gain, while wholesale clubs posted a 9.2-per-cent gain, according to a UBS-International Council of Shopping Centers retail sales tally.
Except for Wal-Mart, whose shares rose 33 cents, many retailers' shares fell yesterday. Penney's stock fell 2.41 per cent; Costco's shares lost more than 1 per cent.
Eduardo Castro-Wright, Wal-Mart Stores U.S. president and CEO, said in a statement the "economy continues to get tougher" and customers increasingly are unable to stretch dollars to the next pay day.
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