Consumers Find Economic Shelter in Discounters

Because of an extra shopping day last month compared to a year ago, the retail industry expected sales to rise in April.

The UBS-International Council of Shopping Centers retail sales tally for the month rose 3.6 percent. The figure surpassed the 2 percent growth estimate and marks the biggest gain since March 2007 when the index was up 5.9 percent. The April performance followed a 0.5 percent decline the previous month, the weakest March in 13 years.

Sales for the two months combined were a tepid 1.6 percent, in line with the average sales growth since the beginning of the industry's fiscal year.

The surprise, however, was the growing gap between discounters and traditional retailers.

Discount chains registered a 3 percent same-store sales gain, while wholesale clubs posted a 9.2 percent gain. Meanwhile, same-store sales at apparel chain stores fell 1.4 percent, according to the ICSC tally.

Except for Wal-Mart, whose shares rose 33 cents to $57.16, investors pushed many retailers' shares down Thursday. Penney's stock fell 2.41 percent and Costco's shares lost more than 1 percent.

Janet Hoffman, managing partner of the North American retail division of Accenture was surprised to see that the April reports showed "a broader base of customers" switching to outlets.

A limping economy, soaring food and gas prices, limited credit, slumping home prices and worries about jobs continue to unnerve shoppers. Americans are gloomier about the economy than just before the U.S. invasion of Iraq in March 2003, according to a recent survey by the Conference Board, a business-backed research group

They're even taking on more debt to pay for food and fuel. The Federal Reserve reported Wednesday that consumer borrowing, particularly on credit cards and auto loans, rose in March at the fastest pace in four months, more than double the increase of the previous month.

Eduardo Castro-Wright, Wal-Mart Stores U.S. president and CEO, said in a statement that the "economy continues to get tougher" and customers increasingly are unable to stretch their dollars to the next pay day.