- The Washington Times - Friday, June 6, 2008

NEW YORK (AP) | Tax rebate checks gave consumers a little extra money in their pockets during May, but most were still spending conservatively, buying necessities such as food and gas and shying away from splurging on clothing or furniture.

The result was some better-than-expected sales for the nation’s retailers, with lower-priced merchants such as discounters and wholesale clubs showing the strongest gains.

Accordingly, Costco Wholesale Corp. and Wal-Mart Stores Inc. were among the strongest performers, but fewer rebate dollars made their way to the mall, and retailers such as Gap Inc. and American Eagle Outfitters Inc. missed expectations.

“It was a great month for discount retailers, but the rest of retail is struggling to capture a share of the consumer’s wallet,” said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle.

Overall, results were better than the gloomy May analysts predicted as consumers still shopped despite rising energy costs, declining home values and tightening credit, and some analysts saw some glimmers of a possible pickup in business later this year. And tax rebate checks helped offset rising gas prices, said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass.

But retailers were still wary. Even Wal-Mart, which surpassed analyst forecasts, acknowledged consumers’ reluctance to spend.

“Our customer is clearly under pressure when it comes to higher gas prices, higher food prices for that matter,” said Tom Schoewe, Wal-Mart’s chief financial officer.

As of May 30, the Treasury Department said 57.43 million tax rebate payments have been sent out totaling $50.041 billion, just under half the $106.7 billion the government expects to send out.

Wal-Mart was one of the few retailers to specifically mention a benefit from stimulus checks. The world’s largest retailer said same-store sales rose 3.9 percent, or 4.4 including fuel sales while analysts surveyed by Thomson Financial predicted a 1.6 percent rise.

Rival Target Corp., which has a somewhat more upscale clientele, said same-store sales fell 0.7 percent, while analysts expected an 0.2 percent drop. Health care, electronics and perishables were the company’s strongest sales categories in May, while men’s apparel, jewelry, and lawn and patio sales were weakest.

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