Wal-Mart stores, Home Depot raise forecasts

NEW YORK — Consumers may not be confident, but the stores that sell to them certainly seem to be.

Wal-Mart and Home Depot, two of the nation’s largest retailers and bellwethers of the U.S. economy, on Tuesday joined a string of other merchants that have boosted their profit outlooks for the year despite a flow of bad economic news. TJX Cos., which owns TJ Maxx and Marshalls, Macy’s Inc., Kohl’s Corp., and Nordstrom Inc. have all raised their outlooks in the past week.

Retailers’ results are a closely watched barometer of how willing Americans are to loosen their purse strings, which is important since consumer spending accounts for 70 percent of the economy. But at a time when families are being squeezed by rising costs, high unemployment, scant pay raises and a weak housing market, the positive forecasts seem to fly in the face of other economic indicators. “It’s cautious optimism. Retailers want to be optimistic but they know consumers can turn on a dime,” said Wall Street Strategies analyst Brian Sozzi. “Retailers are still climbing a wall of worry.”

Merchants have plenty to worry about. They want to avoid a repeat of the aftermath of the financial crisis in 2008 when shoppers pulled back so much that revenue and profits suffered. Consumer sentiment hit a 31-year low in August, according to a survey completed last week, as stock market turmoil and political strife over raising the federal debt ceiling shook already nervous shoppers. And the International Council of Shopping Centers-Goldman Sachs index, which tracks revenue at stores that have been open at least a year at 27 major retailers, has shown three consecutive weeks of declines.

Still, retailers have reason for optimism. Consumers spent more on cars, furniture, electronics and other goods in July — and more in May and June than thought. Retail sales rose 0.5 percent last month, the best showing since March, according to the Commerce Department.

Wal-Mart Stores Inc. accounts for nearly 10 percent of all nonautomotive dollars spent in the U.S. The retailer, which posted a 5.7 percent second-quarter profit increase, said its strategy of going back to everyday low pricing instead of slashing prices temporarily on select merchandise, is resonating with consumers.

Home Depot Inc., the nation’s largest home-improvement retailer, acknowledged that consumers are concerned about the economy. But the company said despite a weak housing market, it has gained market share in several categories including flooring, plumbing, electrical lighting and kitchens in the latest quarter. The retailer reported that second quarter profit rose 14 percent as it had strong sales of lawn and garden products and consumers made storm-related repairs over the summer.