Check out Wal-Mart’s earnings.

The world’s largest retailer posted a 7 percent rise in quarterly profits.

But even as the discounter drew cash-strapped consumers looking to save money, the company also indicated that it could miss second-quarter earnings estimates, which pressured its stock price in the morning.

Consumers are being hit by higher transportation costs and a difficult economic climate, the company acknowledged.

“Customers are faced with results of a tougher economy, higher gas prices, food inflation and the increase in the overall cost of living,” said Eduardo Castro-Wright, head of Wal-Mart’s U.S. operations, on a recorded call.

It also is becoming more obvious that customers are running out of money between paychecks as the company sees business ebb and flow with the paycheck cycle, the retailer said.

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Pain at the other pump: shoe prices rise (Wall Street Journal)
 
Liz Claiborne posts net loss, cuts year outlook

Tax rebate checks are in the mail and some of the rebate cash has already made its way to consumers’ wallets. But will this cash infusion give the economy (and struggling retailers) a boost?

According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.

Here are some comments we rounded up:

• “I will almost certainly save it,” Courtney Hancock said outside a shopping center in the Buckhead section of Atlanta. “At this point there isn’t anything that I’ve been waiting to buy.” Her expected $600 rebate check will likely be used for a bigger purchase later. 
• Lisa Hasson, 39, free-lance pianist and mother of twin, 2-year-old boys in Cincinnati. “I’m probably just putting it in a savings account — holding onto it for the summer. Lean living for lean times.” 
• Ava Lee, 34, has been out of work in Los Angeles since December and says she’ll use her rebate check to pay for “necessary expenses” like food and gas. ”I’d use mine for everyday spending. I would not go out and say, ‘Ooh! I have extra money’,” said Lee, who has turned off her heat and air conditioning to keep expenses down. 
• Sarah Ortiz of Houston said she decided early on to use the tax rebate to pay debt. “I’m trying to get down to one credit card. They say we’re in a credit-crunch,” she said. 
• Daniel Pillow of Houston said he planned to use his rebate to pay his American Express bill, but admitted he’d already used the card to buy some extra clothes in anticipation of getting a check. “I may have spent a little bit, knowing that I was going to get a check,” said Pillow, an employee of the Houston Public Library system. 
• Morgan Lawson, 58, works at the Time-Life Building in New York supervising newspaper deliveries. ”The likelihood of saving it is slim,” he said, adding that prices seem to be rising across the board. He thinks he will have to spend it on necessities, like food and higher energy prices and clothes for his children. ”It sure doesn’t hurt,” to get the extra cash, he said, “But, it’s not a huge boost.” 
• Sergio Rivas, a computer network administrator from Hialeah, Florida, said he would put his rebate toward a deposit on a new apartment.  He said he’s looking for “something a little bit bigger, hopefully with some kind of patio.” 
• Paula Goehe, 61, retired administrative assistant in Indiana: “I’m sorry to tell you I’m not going to spend it. We need the money for retirement. We’ve been retired four or five years and we spent a lot to put our children through college, so we’ll be saving it — even though there is no interest at all.” 
• Dana Bulan, a teacher who lives in Chicago, said she will use her $300 rebate check to pay for her regular tennis lessons and won’t bother trying to save it. ”It’s such a small amount of money, it’s not worth, I think, trying to put it someplace else,” Bulan said.
• John Barker, 57, who installs swimming pools for the “super-rich” in the St. Louis area, said that although his business had not been affected by slowing economic growth, spiraling costs meant he had few plans for his rebate check. ”I’ll put it into my checking account and no doubt it will go for gas or food,” he said in the parking lot of a branch of Bank of America on the outskirts of St Louis. “Looking at the price of oil, I think I’ll need it to fill up my truck.” 

(Click here to read full story) 

(Photo: Reuters)

Check out a little retail sunshine.
 
The weather finally got a little better in April, which helped retailer’s sales even as the economy stayed week, according to Planalytics.
 
“While April 2008, on a national level, may have been an ‘average’ month in terms of temperature — the weather helped unleash pent up demand, improving sales in the Northeast, Midwest and the Ohio Valley,” the consulting firm said.
 
The company, which provides weather information for businesses, said home centers, restaurants and softline retailers all showed positive year-on-year gains. 
 
It called out Bon-Ton, Dress Barn, Family Dollar and Lowe’s as having the strongest sales gains.
 
“While the economy remains sluggish, the weather has certainly done its part this month to improve business’ fortunes,” said Scott Bernhardt, Planalytics Chief Operating Officer.
 
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Dr Pepper Snapple to focus on brands, U.S.
 
Unilever looks for Bertolli sale deal: sources 
 

(Photo: Reuters)

American small business owners are a resolute lot, pushing ahead with plans to grow their operations despite losing a large chunk of sales to soaring energy costs, an American Express OPEN survey showed on Friday.

Ironically, most are also day-dreamers who look on the bright side , the survey added.

Although only 45 percent of U.S. small business owners are optimistic, — a sharp drop from 2004 – more than 70 percent plan to grow their businesses over the next six months, the survey said. Half of them are willing to take on added financial risk to get it done.

It’s not surprising then that the survey showed nearly 9 of 10 small business owners describe themselves as “seeing the glass half-full.” And despite the growing economic uncertainty throughout the nation, the survey said 75 percent of small business owners would still recommend a friend or family member become an entrepreneur.

Nevertheless, some small business owners see the glass half-empty.

Retail business owners have the most negative outlook, with nearly half expecting the economic environment to hurt their prospects, the survey said. One in five small businesses in states located in the northern midwest think they’re in jeopardy of going under.

And 56 percent of small businesses are having cash flow problems, according to the survey.

Check out upcoming earnings and what they might say about food costs.
 
Food inflation is one of many factors putting pressure on U.S. consumers. (Housing, the credit crunch and soaring gasoline prices are some of the others.) But so far, big packaged food companies have been sticking to the mantra that consumers are willing to pay a little more for their wares as long as perceive they are getting a benefit in return.

Next week promises to offer snapshots on how rising food costs may be affecting consumer behavior. That’s because both Kraft, the largest North American food company, and Kellogg, the largest cereal maker, are slated to report earnings.
Kraft gave reporters a preview this week of new products they are launching, and none seemed to be geared to consumers trying to cut back on spending.
 
But grocery store operators seem to know that many consumers are scrambling to pay for necessities like food these days. Both Kroger and Supervalu are offering bonuses for consumers who turn their tax rebate checks onto gift cards to be used in the store. (Those rebate checks also are expected to start coming next week.)
 
So the question is, are things different this time around? Will the rising cost of fuel and food and an economy that might be in recession cause consumers to trade down to store brands and other cheaper alternatives?
 
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Rising food prices are “global crisis”: U.N. chief
 
Charming Shoppes exploring alternatives on non-core assets
 
Protest-hit Carrefour cancels China sales plan
 
Plastic bottle scare is a boon for some (N.Y. Times)

(Photo: Reuters)

 Check out what Wal-Mart customers have to say about the economy and how it is changing how they shop.
 
Reuters reporters went to Wal-Mart stores in New Jersey, Illinois and California this week to see how the weak economy (see today’s jobs report) has made them change how they grocery shop.
 
Here are some of their comments. For the full story, click here. For the Reuters Television video, click here.
“I don’t buy a lot of expensive meat anymore. I buy more vegetables, because they are cheaper.” — Fran Allen, 77-year-old part-time factory employee from Romeoville, Illinois.
 
“I buy what is on the list and nothing that isn’t on the list.” — Patricia Norris, homemaker in Romeoville.
 
“That doesn’t cover it…. I went over again … It’s almost impossible to stay on budget.” – Barbara Armour, whose family food budget is $350-$400 month, after shopping at a Santa Clarita, Cal. store.
 
“Something has to be done, because these prices are just getting ridiculous.” — Karen Stewart, hospital housekeeper from Plainfield, Ill.
 
“I’m making changes just because of how much I’m paying on gas…. I went to a gas station with $100 and came out with nothing.” — Jamie Dorgan, homemaker from Joliet, Ill.

“People might not buy clothes, shoes, jewelry, but they need food. People have to eat.” — Ravi Varma, a convenience store operator who uses the Secaucus Wal-Mart as his supplier.

Also in the basket:

Family Dollar profit falls, cuts full-year forecast

Brands’ dilemma: Target elbows way into upscale beauty world (WWD)

Claiborne to shape up U.S. assets

Fred Katayama visits a Wal-mart just outside New York City to see how consumers socked with high gas prices and a sputtering economy are changing the way they shop. His full report hits the reuters.com website on Friday. It’s part of a Reuters multimedia presentation in text, video and pictures.

Check out the warning from J.C. Penney.
 
The retailer slashed its first-quarter earnings forecast and said Easter sales were well below expectations.
 
That may be a pretty good snapshot of where the American economy is right now. J.C. Penney says half of American families are its customers and those families are under pressure from higher energy costs, a deteriorating job market, the housing downturn and the credit crunch.
 
Not much news there. But according to J.C. Penny’s forecast, things are much worse than the company thought.
 
The warning comes the same week Williams-Sonoma Chief Executive Howard Lester said the economic environment was probably the worst he’s seen in the 30 years he has been in the business.
 
Oh, and Lester added this cheery note:
 
“We believe there are circumstances under which it could get progressively worse, particularly if we find ourselves in a protracted recession.”
 
Also in the basket:
 
Cash-rich retailers stand to gain in credit crunch
 
Li & Fung’s 3-Year Plan: Sourcing Giant Aiming For $20 Billion in Sales (WWD)
 
Office Depot Holder Group files proxy statement 
 

(Photo: Reuters)

Equity analysts at Citigroup Global Markets decided to conduct a survey to figure out how consumers are making their grocery shopping choices in the current environment. 

Not very surprisingly, it found that consumers are becoming more value conscious and will likely favor retailers with sharp pricing.

So who is the sharpest of them all?

“An overwhelming 72 percent of customers surveyed said that Wal-Mart had the lowest prices. Among the top three traditional supermarkets, Kroger was perceived by more consumers to be the lowest priced,” the Citi note stated. 

Citi conducted its online survey in two markets, Texas and Washington, because it said those are two states are where Kroger, Safeway, Supervalu, Target and Wal-Mart – the  five grocery retailers in its coverage universe – compete. 

The survey found that Kroger had the next best pricing message behind Wal-Mart, with 6.9 percent of customers saying that grocery chain had the lowest prices.

Meanwhile, 26.5 percent of consumers found Safeway to be the most expensive, while 24.5 percent of consumers found Supervalu to have the highest prices, it said.

To offset the tough economy, Citi said consumers are reining in their discretionary food purchases, and it has started to see signs of consumers trading down in terms of where they shop (like moving from Target to Wal-Mart), in terms of what items they buy (switching from steak to chicken), and in terms of choosing between branded and private label (buying more private label).

“We believe that consumers will continue to adjust the way they shop if food inflation remains high,” the report said.

(Photo: Reuters)