Retailers can win in a recession, but only if they sell cheap stuff. In a sure sign consumers sacrificed quality and convenience to counter high gas prices (and other economic woes), Walmart (WMT) and Costco (COST) posted better than expected sales gains. Same-store sales climbed 3.2% at Walmart and Costco notched an 8% sales gain.
With more purchases going toward discount chains, however, department stores and mall stores continue to suffer. Limited Brands (LTD) (which operates Victoria’s Secret among other retail chains), saw same-store sales fall 5% for April, far more than expected. We don’t think the worst for the economy has come yet, so we’re wary of any retailer selling premium products, especially to the middle-class. Yachts and lattes aren’t selling well either.
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