There's nothing like spending free money, and that's exactly what consumers have been doing the past several weeks with their stimulus checks. The effect was notable, as discount retailer Wal-Mart (NYSE:WMT) said same-store sales grew 5.8% in June.
Many are attributing the performance to the tax rebate and claim it's generating the stimulus the government had hoped for. While I'm sure President Bush's consumer donation helped, I believe it to be simply a temporary boost. By the end of summer, we'll have spent our wad.
I do believe that the favorable run Wal-Mart has been experiencing won't end anytime soon. There is more to Wal-Mart's performance than a one-time case of found money. It will extend far beyond the dog days of summer.
The fact is, the cost of daily life (be it grocery shopping or filling up your tank) is increasing. Consumers are looking to get the most bang for their buck. They understand that stretching their dollars makes sense and that they'll get the best value at places offering good quality at low prices, not with frivolous fare. Wal-Mart has made its stores the destination spot for them.
It's not just Wal-Mart that's doing well. Fellow discount retailers Costco (NASDAQ:COST), Fred's (NASDAQ:FRED), and BJ's Wholesale Club (NYSE:BJ) also handily beat expectations for monthly comps. Even Target (NYSE:TGT), which has been facing tough competition from Wal-Mart in recent months, managed to show a nudge upward in same-store sales.
The economic malaise isn't going to end anytime soon, though we may wish otherwise. Even though we'll have spent our stimulus checks, you're going to find Wal-Mart continuing to exceed expectations simply because it represents the best value out there, making it and similar stores the best long-term value for your portfolio. It's also why supermarket chain Kroger (NYSE:KR) has exceeded expectations by taking the low-cost destination battle directly to Wal-Mart.
Catch up on consumer spending:
