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Complete Forecast for  May 17 2008

From Staff, Wire Reports

Reports from retailers nationwide on Thursday showed a significant dip in March consumer activity.

Retail sales reports indicated shoppers were buying more basics from discounters and wholesale clubs and sticking to the essentials.

But March proved to be another weak month for many others, including J.C. Penney Co., Gap Inc., and Limited Brands Inc., with all reporting declines in sales.

"Discounters are going to continue to do well in this economy," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "Anything that is discretionary is going to continue to be under pressure."

Consumers have been paying high prices for gasoline, which hit another record -$3.36 per gallon - on Thursday.

They are also facing a sluggish job market. On Thursday, the Labor Department that applications for jobless benefits totaled 357,000 last week, down by 53,000 from the previous week. Even with the improvement, the four-week average for claims rose by 2,500 to 378,250, the highest level since early October 2005.

While many economists believe the country is in a recession, the Bush administration says growth should revive this summer when 130 million households start spending their economic stimulus checks. Janet Hoffman, managing partner of the North American retail division of Accenture, and other analysts believe that any sales lift at stores will only be temporary, however. And many believe shoppers will use a chunk of the money to pay down debt.

Target Corp., which has been stumbling lately, posted a 4.4 percent decline in same-store sales. Analysts had expected a 2.7 percent decrease.

Costco posted a 7 percent gain in sales. Analysts had expected a 5.9 percent gain.

But many department stores and apparel chains did not see gains.

Among department stores, J.C. Penney posted a larger-than-expected 12.3 percent sales decline. The department store retailer had warned late last month that same-store sales would be down at least 10 percent amid a souring economy.

Dillard's reported a 10-percent decline in same-store sales and a 9 percent dip in total store sales.

Saks Inc. reported a 2.9 percent decline in same-store sales; Wall Street had expected a 3.5 percent gain.

Nordstrom had a 9.1 percent decline in same-store sales; analysts had expected an 8.0 percent drop.

Limited Brands reported an 8 percent drop in sales, larger than the 7.2 percent decline that analysts had expected. Gap reported an 18 percent drop in same-store sales; analysts had expected a 7.7 percent decline.

At the company's Old Navy division, same-store sales were down 27 percent.

Wal-Mart Stores Inc. and Costco Wholesale Corp. were among the best performers. Wal-Mart raised its earnings outlook, noting that better inventory control helped to limit markdowns on merchandise.