Consumers give stores some relief but still spend cautiously

Early sales reports issued Thursday showed that shoppers -who are contending with rising gas prices, sagging home and worries about their jobs -bought the basics at discounters and wholesale clubs. That made Wal-Mart Stores Inc. and Costco Wholesale Corp. among the top performers last month, while most mall-based apparel stores, whose merchandise falls into the category of discretionary items, struggled.

"Consumers are focusing on value and price points and stretching their dollars," said Ken Perkins president of RetailMetrics LLC, a research company in Swampscott, Mass. "They are feeling the pinch on multiple fronts."

He and other analysts expect only a modest uptick in sales in May and June as consumers spend tax rebate checks that are starting to arrive.

"There's too much going on," in the economy, Perkins said. He and others expect shoppers to use the extra cash to pay down debt and catch up on utility and food bills.

According to a preliminary tally from Thomson Financial, eight retailers beat estimates, while five missed. The tally is based on same-store sales, or business at stores open at least a year; they are considered a key indicator of a retailer's health.

The retail industry expected a lift in April sales figures because of an extra shopping day last month compared to a year ago. That quirk depressed March sales, while inflating April figures; analysts are looking at retailers' performance for the two months combined, expected to be weak overall.

A deteriorating economy, soaring food and gas prices, limited credit and slumping home prices continue to unnerve shoppers. The Conference Board said late last month that Americans are gloomier about the economy than just before the U.S. invasion of Iraq in March 2003.

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

"As money gets tighter for them toward the end of the month, sales drop more than we have seen in the past," he said.