Report says buyers' price consciousness is rising

Alfredo Cardona of Santa Ana, Calif., has always liked buying his clothes at Nordstrom, but lately he switched to Burlington Coat Factory, where the prices are lower.

The 24-year-old financial adviser said he now shops "anywhere you can save." And he's not alone.

Retailers last week posted moderate sales results for June as shoppers kept spending but tried to get more for their money.

Wall Street celebrated the sales report with major gains Thursday seeing evidence that the retail economy was not collapsing amid a nationwide housing downturn. But retail experts also saw an increased price consciousness among consumers.

Sales dropped on average at department stores, but rose more than expected at warehouse stores.

Sales at stores open a year or more rose 2.4 percent to $71.3 billion, which was better than expected but down from last year's 3 percent gain, according to the International Council of Shopping Centers' tally of 50 major chain stores nationwide.

"I think it's a story of price," said Michael Niemira, chief economist for the shopping center group. "With a softer feel to the economy, there's been a shift to the discounters and wholesale clubs."

Consumers are fretting over a variety of problems, retail experts say, including a slowing housing market and higher prices for food and gasoline.

"You never know, week-to-week, am I going to put $50 in my car, or is it going to be $35?" said Phil Rist, vice president of strategy for BIGresearch, a consumer intelligence firm that surveys 8,000 shoppers a month. "The average consumer starts thinking, 'What's next?' Maybe I just need to slow down a little bit.'"

Maria Morales, a 37-year-old mother of six from Santa Ana, has found plenty of ways to trim spending. She buys shoes at Payless ShoeSource, food at the 99 Cents Only Stores and clothes at Susie's Deals, where $5 will fetch two tank tops, a pair of jeans or a Hawaiian shirt. She shops "wherever there's a discount," Morales said.

While shoppers have shown they are resilient, they also are proving more cautious.

Economist Scott Hoyt predicts that overall retail sales, excluding autos, will rise 4.2 percent this year, compared to 7.3 percent in 2006. Next year, he anticipates growth will slow further to 3.2 percent.

Generally, it takes a few years before the full effect of shrinking household wealth -- or the so-called "wealth effect" -- translates into slower spending, Hoyt said. The impact will likely "be greatest in the second half of this year and into the first half of next year," he said.

Refinances to pull cash from home equity remained "quite active" through the first quarter, Hoyt said, but "again, it's a situation where we feel the worst is yet to come."

June, however, wasn't as bad as some retail gurus were expecting. And it's an important month, during which retailers cut prices so they can move merchandise and make way for back-to-school offerings. Typically, June is the second-largest sales month, following December.

Some retailers made the most of it.

As a group, warehouse stores posted a sturdy 6.3 percent jump. Discounters, such as Wal-Mart and Target Corp., advanced 2.1 percent, outpacing the group's average 1.1 percent gain so far this year.

But department stores collectively slid 2.5 percent. Of the 47 chains monitored by Thomson Financial, 53 percent missed expectations.

Department store giant Macy's Inc. took a sizable whack at its second quarter profit projections following its 2.7 percent same-store sales dip in June. The parent of the Macy's and Bloomingdale's chains said it now expects to earn 20 to 30 cents a share, rather than the 35 cents to 45 cents it had predicted earlier.

Sears Holdings Corp., which operates the Sears and Kmart chains, cut its second quarter profit expectations earlier this week while Home Depot Inc. warned that its annual profit may fall 15 percent to 18 percent.

The world's largest retailer didn't disappoint in June. Wal-Mart said grocery sales helped advance its same-store sales by 2.4 percent, as its Sam's Club warehouse club division bounced ahead 6.9 percent.

Eduardo Castro-Wright, chief executive of U.S. Wal-Mart Stores, said in a statement that consumers today are "challenged financially."

"Gas prices have moved to be their chief concern in our latest survey, and they appreciate the opportunity to save on everything," he said.