Even the rich go 'smart shopping'

Caught in the maelstrom of higher gas and food prices, Americans -- even more affluent ones -- are seeking shelter in wholesale clubs and discount apparel chains.

Low-price operators Costco Wholesale Corp., Wal-Mart Stores Inc. and TJX Cos. reported better-than-expected sales Thursday, while traditional apparel chains Nordstrom Inc., J.C. Penney Co. and Limited Brands Inc. struggled.

"The smart shopper is in full bloom," said Craig Johnson, president of consultancy Customer Growth Partners. "They're looking to stretch their household budgets, and if you can get decent quality merchandise, why pay full price?"

"Smart shopping" is sweeping through all wage classes, analysts say, and it could spell trouble for retailers' profits and for the economy, too. Among department stores, Seattle-based Nordstrom posted a 3.8 percent drop in same-store sales, more than double the decline that Wall Street expected. Penney reported a 1.7 percent decline in same-store sales, though that was better than the 4.6 percent declined analysts expected.

Issaquah-based Costco's 8 percent increase surpassed the 6.1 percent estimate, helped by higher gas prices. Excluding fuel, same-store sales rose a solid 5 percent as shoppers were attracted to merchandise in bulk.

Apparel chains are discounting more. First-quarter profits are slated to be down by 14.9 percent, said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. That compares with a projection in January of 5.3 percent profit growth.

Retailers' first fiscal quarter ended in April and companies will start reporting their financial results next week.

"Consumers are focusing on value and price points and stretching their dollars," said Perkins. "They are feeling the pinch on multiple fronts."

He and other analysts expect only a modest rise 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.

That could be a disappointment for the Bush administration, which had hoped the checks would give the economy a much-needed lift. Because of an extra shopping day last month compared with a year ago, the retail industry expected sales to rise in April.

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.