May 20, 2008

All year, Wal-Mart (WMT) and Costco (COST) have remained two shining bright spots in an otherwise beleaguered retail industry.

Wal-Mart recently reported better than expected 1st Quarter results - with profits rising nearly 7%. They also surprised analysts with a 3.2% rise in same-store sales for April thanks to strong performances from their apparel, grocery, health and entertainment lines.

Similarly, Costco reported an 8% rise in April same-store sales - well ahead of a 6.1% consensus estimate.

While these results surprised the Street, our ChangeWave surveys have been showing tremendous strength for both companies since late February. " Business is up and the good times will continue for both discount retailers," we wrote in a March alert. "While most other retail chains will see less spending by consumers over the next 90 days, Costco (+8) and Wal-Mart (+2) are bucking the trend and will see more."

Here's the chart from our March 3rd report:

The strong Costco and Wal-Mart results were repeated in our April consumer survey, which found a large-scale movement towards discount retailers driven by high inflation and an overall spending environment that was continuing to slow.

Proof is in the Pudding

Finally on May 8th, the Associated Press reported that consumers were giving some of the nation's retailers "a little relief in April after months of dismal sales, gravitating toward discounters and wholesale clubs but generally shying away from stores selling clothes and other non-necessities."

"Wal-Mart and Costco were among the top performers last month," they stated, in a confirmation of our survey findings, "while most mall-based apparel stores struggled."

A weakened economy coupled with skyrocketing gas prices and surging food costs have resulted in a huge spike in inflation worries among consumers. But these are Costco and Wal-Mart times, and they have risen to the occasion not only with their customers, but with investors as well.

The stock prices of both retailers are up more than 15% since late February.

Wal-Mart (WMT) - 3 Month Chart

Costco (COST) - 3 Month Chart



Related ChangeWave Articles
-- Inflation's a Huge Drag as Energy Costs Transform Consumer Behavior (8/19/08)
-- Consumers Spending More Time in The Kitchen (8/12/08)
-- Yet Another Spending Downtick in ChangeWave Consumer Survey (7/22/08)
-- No Mas! Costco and Wal-Mart Lead a Consumer Revolution (5/27/08)
-- U.S. Inflation Worries Spiral as Spending Falls... (4/14/08)
-- No Signs Yet of a Bottom (3/5/08)