Survey Finds High Inflation & Spending Cut Winners & Losers (WMT, COST, SHLD, BBBY, M)

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There is an interesting report out of ChangeWave, which shows that higher prices combined with tighter consumer pocketbooks are driving customers significantly. A large-scale movement to discount retailers driven by skyrocketing inflation concerns and an overall spending environment that continues to slow.

ChangeWave says that it surveyed 4,735 consumers (completed April 7th) to find a pattern based on the spending focus for the next 90 days.  A quote would pretty much say it all: "In a clear sign the economic downturn isn’t over yet, this is the third-consecutive ChangeWave survey in 2008 showing a recession in consumer spending. The survey found that better than two-in-five U.S. respondents (42%) say they’ll spend less over the next 90 days than they did a year ago – 3-pts worse than ChangeWave’s previous survey in February 2008."  Another 25% say they’ll spend more, unchanged from previously.

The decline in spending continues to cut across all income levels. Going forward, the most disconcerting finding isn’t only tighter spending; it’s the huge and growing toll that inflation is having on consumers.  The long and short is fewer and fewer items at higher and higher prices.

46% of those spending less and that said why they were spending less cited that inflation as their single greatest concern, up 6-points from February 2008; and another 43% cited higher energy costs, up 11-points from the prior report. Also, 30% of those spending less cited debt reduction and 25% cited that they want to save more money.

Other findings from ChangeWave show that 50% think the economy is going to worsen over the next 90 days, compared to just 14% who think it will improve; and 37% now say they are unsatisfied with their personal finances, up from 21% in November 2007.

Sharply lower spending and higher inflation are also noted as being coupled with deteriorating housing values to produce a very cautious American shopper.  The findings are great for Wal-Mart Stores (NYSE: WMT) and Costco (NASDAQ: COST), which sell in bulk to curb per unit costs.

Costco (COST) was ChangeWave’s biggest winner among shoppers.  Wal-Mart (WMT) also showed positive growth, though 1-point less than previously.  Costco and Wal-Mart were also the two biggest winners in ChangeWave’s February survey.

On the downside, Sears (SHLD), Bed Bath & Beyond (BBBY), Linens N Things, and Macy’s (M; -8) showed the weakest trends going forward…. sorry, Mr. Lampert isn’t out of the woods yet.

Consumer electronics is seeing the biggest slowdown of any spending category… 15% say they’ll spend more there over the next 90 days, compared to 37% who say less.  That is an 8-point decline since February and the weakest 90-day outlook ever recorded by ChangeWave.

You can probably guess what follows…. Restaurant Spending and Durable Goods….

Jon C. Ogg
April 15, 2008