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Apr10
Retail Discounters Shine During Slow Times: Wal-Mart, Costco Enjoy Sales Increase

Consumers do a couple things during hard times: think of family and home, and look for low cost, specific items.

That's why Wal-Mart (NYSE:WMT) and Costco Wholesale Corp. (Nasdaq:COST) were among the few retailers enjoying sales increases in March. Wal-Mart increased by 0.7 percent in sales over a year ago, while Costco really soared, gaining 7 percent worldwide and 5 percent domestically.

When talking of people thinking of family and home above, that translates to trusted brands offering good value at a fair prices; something Wal-Mart and Costco shine at.

In contrast, retailers like J.C. Penny (NYSE:JCP), Gap Inc. (NYSE:GPS),  Limited Brands (NYSE:LTD), Target (NYSE:TGT) and American Eagle Outfitters Inc. (NYSE:AEO) all experienced declining sales in March.

Wal-Mart%2C%20Costco%20outperform%20major%20retailers.jpg

Consumers are focusing primarily on purchasing food and health products, although at Wal-Mart falt-panel TV sales were very good in March, along with strong food sales. As a result, Wal-Mart increased its guidance for the quarter.

"The economic environment continues to be challenging here, with slowing employment trends, higher energy and food prices and declining values for homes," said Steven Baumgarten, an analyst at PNC Capital Advisors in Philadelphia.

A survey of 37 retail chains showed that same-store sales (stores open at least a year) fell by 0.5 percent in March, the largest decline in about a year.

What's interesting and instructive about Wal-Mart, is they didn't raise their guidance solely on an increase of sales, but rather on the fact that they have such streamlined operations, in which they have a complete handle on controlling expenses adn inventories.

That's what made them a great retailer in the first place, and what keeps them solid performers; whether times are good or bad economically.

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