Wal-Mart, Costco Post Gains

Wal-Mart Stores and Costco Wholesale reported April sales yesterday that rose more than analysts estimated, as U.S. consumers, contending with gasoline at a record average $3.65 a gallon, sought discounts on clothing and food.

Wal-Mart, the world's largest retailer, said sales at stores open at least a year climbed 3.2 percent, beating its forecast. Industry sales climbed 3.6 percent, the most since March 2007, the International Council of Shopping Centers said.

Consumers worried about job losses headed for Wal-Mart and Costco instead of malls, hurting sales at Gap. Saks sold clothes for as much as 40 percent off to draw shoppers. As customer expenses rise, stores may need to keep up promotions, said Britt Beemer, founder of America's Research Group.

"If you didn't have a sale, you didn't have customers," Beemer said in a telephone interview. "Consumers are having a hard time dealing with inflation in both food and fuel."

Sales at Costco and TJX, the owner of the Marshalls discount chain, both advanced 8 percent.

Wal-Mart climbed 33 cents to close at $57.16. The retailer's share price is up 21 percent this year, the biggest gain among the 30 companies that make up the Dow Jones industrial average. Costco dropped 88 cents, to $71.20.

Wal-Mart, which slashed prices as much as 30 percent in January, said customers were spending less before their paychecks arrive at the end of the month, signaling that the economy is getting tougher.

Consumers cut back on purchases of home goods and clothes as home values declined in most of the country. Sara Lee and Kellogg have boosted coffee and cereal prices as commodity costs have surged.

The S&P 500 Retailing Index has dropped 2.9 percent this year, while S&P's Consumer Discretionary Index has declined 1.4 percent. The S&P 500 has decreased 4.8 percent.

"I've never seen numbers like this," Beemer said. "The numbers of consumers a day who are literally putting everything on hold right now and slowing down is incredible. Even as bad as it now, it's going to be much worse when gas prices hit $4."

Target, the second-largest U.S. discount retailer, said same-store sales rose 3.1 percent, missing analysts' estimates. The company said sales were "slightly below" its plans. Sales at department stores Nordstrom and J.C. Penney declined.

"What we're seeing is a big shift from discretionary spending, eating out, those types of activities," Sarah Henry, an analyst with MFC Global Investment Management in Berwyn, Pa., said in a Bloomberg Television interview. MFC has $240 billion under management, including Wal-Mart shares.

Gap, the largest U.S. clothing retailer, said same-store sales dropped 6 percent. Sales at Limited Brands, owner of the Victoria's Secret chain, fell 5 percent.

BJ's Wholesale Club, the third-largest U.S. warehouse club, and discounter Fred's reported sales gains that beat forecasts. TJX and Ross Stores, which sell designer clothes at reduced prices, also exceeded projections.

Teen retailers' sales gained 6.4 percent, the International Council of Shopping Centers said. Aeropostale, which sells $10 polo shirts and $20 jeans, said sales surged 25 percent. It increased its forecast. Abercrombie & Fitch and American Eagle sales also increased.