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Marketplace Report: Gas Prices Hurt Wal-Mart

ALEX CHADWICK, host:

Back now with DAY TO DAY. I'm Alex Chadwick.

The latest sign that rising gas prices are beginning to bother consumers comes from Wal-Mart. The retailer estimates its sales for May will just barely keep up with its profit forecast. MARKETPLACE'S Janet Babin is here with more.

Janet, how are gas prices affecting retailers like Wal-Mart?

JANET BABIN reporting:

Well, Alex, you know, the company says that high gas prices are responsible for lowering sales in May because of this paycheck cycle thing. You know, when people have to wait until they get paid to buy stuff, stores will see a spike around the 15th and 30th of the month, when people can afford the things they need.

So Wal-Mart had forecast same-store sales to be between 2 and 4 percent, and it looks like those sales numbers will be in the range, but only just: increasing sales for May to about 2.3 percent.

CHADWICK: So they'd been hoping for better figures than that. They're not getting them. What does this mean to retail analysts?

BABIN: Well, you know, I think the general fear is when Wal-Mart's sales numbers are anemic, everyone is going to be in trouble. I mean, we're talking about the world's largest retailer here.

I spoke with Richard Hastings about this. He's an economic advisor with the Federation of Credit and Financial Professionals, and he says it looks like rising gas inflation, as you would expect, might be starting to affect certain households, especially those who shop t Wal-Mart.

But more than just high gas prices, Hastings thinks, you know, it's really a combination of pressures that could be forcing consumers, overall, to reign in spending.

Mr. RICHARD HASTINGS (Economic Advisor, Federation of Credit and Financial Professionals): Higher healthcare spending, a slow-down in residential construction, rising interest rates for home equity credit, and rising interest rates generally for all sorts of credit card and short-term borrowing instruments, that will contribute to some pressure on many households; some of which shop at Wal-Mart quite a bit.

BABIN: But Hastings isn't sure whether these factors are affecting all consumers and retailers or only Wal-Mart and its customers.

CHADWICK: But Wal-Mart's customers, I mean, that's a lot of people. Don't - I mean, a lot of people shop there, right?

BABIN: That's true. We tend to think of Wal-Mart as this low-income retailer, but really they can count some up-scale customers as part of its base. And also the company Sam's Club Division appeals to small business owners.

You know, Alex, last month, retailers blamed cool weather for slower sales, and in March the problem they said was the late Easter holiday. Hastings says, you know, he's withholding judgment on what these Wal-Mart numbers mean until some of the other economic indicators come out, and that's expected later this week.

Now, coming up later today on MARKETPLACE, we're going to look at why one baseball team's losing strategy on the field is actually a winning business strategy.

CHADWICK: Thank you, Janet. We'll listen for that.

Janet Babin, of Public Radio's daily business show, MARKETPLACE, produced by American Public Media. Transcript provided by NPR, Copyright NPR.

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