US consumers finding way out of crisis

American consumers, whose debt-fuelled spending was the engine of global growth until the credit crisis, appear to once again be trading up to more expensive purchases.

American consumers, whose debt-fuelled spending was the engine of global growth until the credit crisis, appear to once again be trading up to more expensive purchases, after two years of hair-shirt habits.

Retailers reporting earnings yesterday told a tale of two consumer economies, as the discount giant Wal-Mart said its core, low-income customers were still struggling while the upscale department store chain Saks boasted better-than-hoped profits.

Analysts said Wal-Mart was losing some of the better-off customers who headed to its stores during the recession in search of bargains.

Wal-Mart disappointed Wall St with its outlook for sales in the current quarter, even as its profits in the three months to April 30 beat expectations.

The company promised to expand overseas to mitigate the effects of the sluggish US economy, and said that sales in its international division had surpassed 25 per cent.

Overall, the company reported net income of US$3.32 billion, up 10 per cent on the same three-month period in 2009, despite a 1.1 per cent decline in like-for-like sales in the US. Joel Bloomer at Morningstar told clients to look past the disappointing forecasts.

Redbook Research said US chain store sales were running up 2.9 per cent over last year. Its weekly report offers a sales-weighted index of year-over-year same-store sales growth in a sample of general merchandise retailers representing about 9000 stores.

Saks, which operates high-end department stores, reported a profit of US$18.8 million in the quarter ended May 1, compared with a loss of US$5.1 million in the same period last year, when the recession was at its height.

And it raised its outlook for the rest of the year to reflect a creeping optimism, saying comparable store sales growth will be in the "mid-single digit percentage range".

Similarly positive noises were made by the largest US DIY chain, Home Depot. It said homeowners were making smaller purchases, leading it to upgrade its profit forecast for the year.

- INDEPENDENT