Shoppers stimulate discount stores
Wal-Mart and Costco post strong June sales as consumers seek to get the most from one-time government payments; performance from clothing retailers was mixed.
NEW YORK (CNNMoney.com) -- Consumers sought the biggest bang for their economic stimulus bucks in June, sending the sales of discount merchants such as Wal-Mart and Costco surging.
"The perception of a weakening economy will prevail in people's shopping moods and where they decide to spend their money," said Ken Brown, president and retail analyst for ResearchConnect.com, a research Web site.
As the economy remains weak, Brown said shoppers - rich and poor - are flocking to discounters for low-cost goods.
"I think you'll see a wider spread of people, demographically, in Wal-Mart today than you would have a couple of quarters ago," he said.
Wal-Mart Stores Inc. trounced analyst expectations Thursday with a 5.8% jump in June sales for stores open at least one year, attributing the increase to the government's economic stimulus payments.
As a result of the strong month, the world's No. 1 retailer raised its earnings guidance for the second quarter ending this month.
Analysts interviewed by Thomson Reuters had expected an increase of 3.8% for the five weeks ended July 4, not including gas sales.
Wal-Mart (WMT, Fortune 500) credited the increase to strong seasonal sales driven by favorable weather and "improved assortments," as well as a continued windfall from the government's economic stimulus program. The stimulus also drove Wal-Mart sales in May.
The retailer said sales jumped across the board. But the most dramatic increases were in entertainment, particularly for flat-screen televisions, and apparel, especially in swimwear and sportswear.
Sales were also strong in groceries, and health and wellness, the company said.
Wal-Mart, the largest corporation in America, according to the Fortune 500, said it now expects earnings for the fiscal second quarter ending this month to be between 82 and 84 cents per share.
Analysts surveyed by Thomson/First Call expect a 9% increase in sales, to $101 billion, and a 14% jump in earnings, to 82 cents per share.
Another major retailer, the warehouse club Costco Wholesale (COST, Fortune 500), beat analyst expectations with a 9% increase in same-store sales for June, compared to a projected increase of 8.5%. The figure included gasoline sales.
BJ's Wholesale (BJ, Fortune 500) also did well, with an increase of 16.5% including gas sales, nearly double the 8.5% jump projected by Thomson Reuters' analyst consensus.
Target, (TGT, Fortune 500) a top competitor to Wal-Mart, said that its same-store sales edged up 0.4%, well above the 0.5% decline projected by analyst consensus, according to Thomson Reuters.
Department store chain JCPenney (JCP, Fortune 500) reported a decline in same-store sales of 2.4%.
Of the first 16 retailers reporting June sales, Thomson Reuters said 62% of them beat estimates for same-store sales. But reports from clothing stores were spotty.
Stein Mart's (SMRT) same store sales fell 7.7% in June. The company blamed regional slumps in Florida and Arizona, states that were hit hard by the housing crisis.
Sales for Gap Inc. (GPS, Fortune 500) fell 7%, with Old Navy its worst-performing division, declining 10%. Limited Brands (LTD, Fortune 500) reported a 9% decline, with the worst performance from Victoria's Secret, down 12%.
The top performers were The Buckle (BKE), a hip clothing retailer for young adults, and Children's Place (PLCE), which may have reaped a greater stimulus benefit because it caters to families.
The Buckle reported a 28.9% increase in same-store sales, compared to an estimated increase of 21% from Thomson Reuters. Children's Place reported an increase of 16%, more than double Thomson Reuters' estimated jump of 7.8%. 
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