Store Sales Still Slow; Wal-Mart An Unexpected Bright Spot

Turns out having a Leap Day wasn't much help, as leading retailers turned in mostly slow sales for February. And while some were a little less lackluster than predicted, stores execs are singing what's becoming a very familiar tune--consumers are worried about the economy, pinched by gas prices, and running out of credit.

"There's no denying that shoppers are determined to keep a tight lid on spending, and we expect retail sales to generally remain weaker and deteriorate through the rest of the year," says Frank Badillo, senior economist for TNS Retail Forward, a Columbus, Ohio-based retail consultant. "And right now, the big question mark is jobs and income. For now, shoppers' self-inflicted cutbacks are more of a result of credit problems. But if unemployment starts to rise and people's income goes down, that will change."

In its most recent ongoing ShopperScape survey, TNS says that the trend toward cutting back is strongest among lower income households. Some 31% of the down-market shoppers in its survey say they plan to spend less than last year, compared with 28% of middle market households, and 25% of affluent households.

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And yep, consumers say it's all because of high gasoline and food prices. "High gasoline prices are driving plans by 46% of shoppers to spend less overall-including more than half of all down market households," the company says. And because of rising food prices, about half of all shoppers say they are avoiding food items that seem "just too expensive."

Consumers also say they are eating out less, using more coupons and consolidating their spending at stores where they can save money.

In February, Wal-Mart benefited from that trend. The Bentonville, Ark.-based chain reported February same-store sales results that outperformed the market. In the U.S., same store sales results gained 2.5% over the prior year. The company says sales in apparel, long a weak spot at Wal-Mart, improved and that sales in food, flat-panel TVs, digital audio, video games and pharmacy were also strong.

Softness in the home area persisted. In an effort to put shoppers back in the mood for home décor, the company also unveiled a new home-furnishings line earlier this week, called Canopy. Aimed at the budget shopper, Wal-Mart says prices on the new line are 40% below competitors'. The company is also stepping up its efforts to spruce up the home departments in its stores by laying out products organized by room, changing signage and emphasizing the coordination and breadth of its offerings.

But Retail Forward's Badillo expects sales of home furnishings, which were also an especially soft spot at JCPenney, to continue to struggle. "Problems in the housing market have something of a lag effect," he says. "While sales got really bad for home-improvement retailers first and then furniture stores, it's finally trickling down. And it's not likely to get better unless something happens to ignite the housing market."

The new focus on thriftiness also helped discount warehouses. At Wal-Mart's Sam's Clubs, same-store sales gained 2.8%, without fuel; with gas, same-store sales gained 5.2%. Gasoline also helped other warehouse retailers, with Costco posting a 7% jump, and BJ's Wholesale Club recording a gain of 5.9%.

And sales were also up a bit at Minneapolis-based Target, which reported same-store sales up 0.5%, a tad higher than forecast.

But it's still tough sledding for department stores. At JCPenney, sales fell 6.7% and at Kohl's, 3.8%. Even high-end retailers also saw declines, with sales dropping 7.3% at Neiman Marcus, and 5.8% at Nordstrom. Among department stores, Saks Fifth Avenue was the only one to buck the trend, with sales gaining 3.4%.

Apparel also took it on the chin, with sales at the Gap dropping 6%, including an unexpected downturn at its Banana Republic division. And at Limited Brands, which owns Victoria's Secret and Bath & Body Works, sales fell 9%. While there were plenty of declines in the teen market, there were some out-and-out home runs, too. Same-store sales at Buckle jumped 24.3%, Aeropostale gained 7%, and at Pacific Sun, sales increased by 6%.

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