NEW YORK (Reuters) - Wal-Mart Stores Inc <WMT.N> on Thursday reported a better-than-expected 3.2 percent rise in April sales at U.S. stores open at least a year, boosted by demand for basic items like groceries and medicine.
By Nicole Maestri
NEW YORK (Reuters) - Wal-Mart Stores Inc <WMT.N> on Thursday reported a better-than-expected 3.2 percent rise in April sales at U.S. stores open at least a year, boosted by demand for basic items like groceries and medicine.
But the world's largest retailer gave a tepid outlook for May as the economic situation gets more difficult and consumers try to stretch their dollars by purchasing cheaper cuts of meat or trading down to pasta.
"The economy continues to get tougher and the 'paycheck cycle' is more pronounced for customers than in past months," Eduardo Castro-Wright, head of Wal-Mart's U.S. store division, said in a statement.
!ADVERTISEMENT!"As money gets tighter for them toward the end of the month, sales drop more than we have seen in the past."
Smaller rival Target Corp <TGT.N>, whose April sales at existing stores rose a less-than-expected 3.1 percent, also gave a weak forecast for May.
"We continue to see weakness in markets that are experiencing housing market-related stress, particularly in Florida, Arizona, Nevada and parts of California," Target said on a recorded call.
Wal-Mart shares rose 70 cents or 1.2 percent to $57.53, while Target shares fell $1.13 or 2.1 percent to $52.31 in morning New York Stock Exchange trading.
Ben Pivar, vice president at consulting firm Capgemini, said consumers are showing more caution, buying staples and holding back on splurges, in this environment.
"There's still a lot of uncertainty at the consumer level with respect to where the economy's going," he said.
WAL-MART SALES SURPASS EXPECTATIONS
Wal-Mart's 3.2 percent gain in April U.S. sales at stores open at least a year, known as same-store sales, was above analysts' average forecast for a rise of 2.1 percent, according to Reuters Estimates. It also surpassed Wal-Mart's own forecast for a gain of 1 percent to 3 percent.
Same-store sales at its namesake discount stores rose 2.6 percent, while they advanced 6.6 percent at its Sam's Club warehouse division.
Wal-Mart said net sales in the month, ended May 2, rose to $29.18 billion from $26.57 billion a year earlier.
"Customers are buying less expensive protein sources and trying to stretch their dollars with purchases of boxed dinners and pasta," the company said on a recorded call.
"Moreover, they are gravitating toward more private label than in the past few months."
Consumers continued to buy flat-panel TVs, video games and gaming systems, Wal-Mart said, while the allergy season boosted sales of prescription and over-the-counter medications.
Apparel sales improved, while sales in its home department remained soft, it said.
For May, it forecast U.S. same-store sales would be flat to up 2 percent.
"It's currently difficult to quantify the impact from the stimulus checks," said Chief Financial Officer Tom Schoewe, referring to rebate checks being mailed to U.S. consumers as part of Washington's $152 billion economic stimulus package.
Wal-Mart will report its first-quarter results on May 13. Last month, it said it expected earnings per share from continuing operations of 74 cents to 76 cents for the quarter, up from a previous forecast of 70 cents to 74 cents.
TARGET SALES OFF TARGET
Target's April same-store sales rose 3.1 percent, missing analysts' average forecast for a gain of 4.5 percent. Target had forecast a mid-single-digit increase.
"Comparable store sales performance in April was slightly below our planned range," Chief Executive Gregg Steinhafel said in a statement.
Sales were strongest in health care and consumable items and were weakest in jewelry, home decor and seasonal items, the retailer said.
Sales for the four weeks ended May 3 increased 9.0 percent to $4.25 billion.
For May, Target forecast same-store sales between down 1 percent and up 1 percent.
Target's sales have weakened in recent months as its shoppers overlook purchases of higher margin items like clothes and home decor in favor of basics like food or laundry detergent.
(Reporting by Nicole Maestri; Editing by Gerald E. McCormick and John Wallace)
