Despite falling consumer confidence and gas prices that teetered around $4 a gallon, retailers surprised analysts by reporting yesterday better-than-expected same-store sales for May.
Discount retailers like Wal-Mart Stores Inc., Costco Wholesale Corp. and TJX Cos. Inc. fared particularly well as price-conscious customers spent federal income-tax rebate checks on groceries, gasoline and off-price clothing.
"The rebate checks were going to be a wild card this month, but it certainly looks like they kicked in," said Ken Perkins, president of the research firm Retail Metrics. "The fear was that high gas prices were going to siphon off most of the stimulus checks into consumers' gas tanks and, given rising food costs, into their grocery carts."
Discretionary items, such as apparel at midtier department stores and luxury chains like Saks, however, remained "very sluggish" as consumers focused on necessities, Perkins said.
Leading the surprising gains was Wal-Mart, whose same-store sales rose 3.9 percent, excluding fuel, as demand for groceries, flat-panel TVs and computers remained strong. Sales at the company's namesake stores rose 4 percent, while sales at Sam's Club were up by 3.6 percent. The company attributed the results to its low prices and said sales of home furnishings were up for the first time in more than two years.
Other wholesalers also benefited. Same-store sales at Costco jumped 9 percent in May, compared with an 8 percent increase last year. BJ's Wholesale Club Inc.'s comparable sales rose 6.8 percent, excluding gasoline, in May.
"May came in better than expected," Michael P. Niemira, chief economist at the International Council of Shopping Centers, a trade group, said in a statement.
"It is very clear that consumers are spending in a conservative manner as the lift largely came from an increase in sales in the wholesale, drugstore and discount sectors," Niemira said.
Even so, same-store sales at Target Corp. fell 0.7 percent, compared with a 5.8 percent increase a year ago. Analysts said the store's focus on "discretionary items" such as apparel, jewelry and home furnishings have deterred customers shopping for groceries and medications. The demand for discount goods has also affected clothing stores.
Off-price retailer TJX reported a 2 percent increase in comparable sales, but sales at higher-end clothing stores lagged. Saks, for example, reported an 8.7 percent drop in sales, compared with a 4.5 percent increase last year.
The Gap Inc., which owns Banana Republic and Old Navy in addition to its namesake store, said comparable sales tumbled 14 percent, compared with a 3 percent drop in the same month a year earlier. The largest hit came at Old Navy, where sales fell 25 percent.
Limited Brands Inc., whose stores include Express, Victoria's Secret and Bath & Body Works, said sales fell 6 percent in May, compared with a 2 percent increase last year, as customers continued to cut back on trips to shopping malls.
Midtier department stores Kohl's Corp. and J.C. Penney Co. both reported drops in same-store sales. Kohl's said sales fell 7.2 percent, while J.C. Penney attributed its 4.4 percent drop to weakened sales of big-ticket items like fine jewelry and housewares.
Nordstrom, which moved the beginning of its semiannual sale up from June, said sales jumped 10.9 percent in May. But the company expects a drop of 18 percent to 22 percent in June.