Wal-Mart, other discounters top February estimates

NEW YORK (Reuters) - U.S. discount chains posted better-than-expected gains in February sales at existing stores on Thursday, as cash-strapped consumers looked for bargains on everyday items like food, medicine and laundry detergent.

Wal-Mart Stores Inc (WMT.N), the world's largest retailer, said sales at its U.S. stores open at least a year rose 2.6 percent, excluding sales of fuel, helped by strength in its grocery, health and electronics departments. The company also cited improving trends in its apparel business.

Analysts, on average, were expecting a rise of 1.1 percent, according to Reuters Estimates, while Wal-Mart had forecast same-store sales to be between flat and up 2 percent.

Including sales of gasoline, same-store sales rose 3 percent.

Wal-Mart shares were up 1 percent in midday trading, one of the few retail stocks on the plus side.

Wal-Mart's positive surprise helped fuel a 2 percent increase in average same-store sales for the entire retail sector as tracked by Retail Metrics. That topped the tracking firm's expectation for a 1.2 percent increase and was the best monthly gain since November.

The slowing U.S. economy has made consumers more conscious of their spending as they grapple with declining home values, resetting mortgage payments and higher food and fuel costs.

In February, that helped stores that offer shoppers more for their money.

Target Corp (TGT.N) reported a 0.5 percent gain in February sales, topping analysts' average expectation for a decline of 0.3 percent, according to Reuters Estimates.

Family Dollar Stores Inc (FDO.N) also trounced analysts' average forecast for a 0.2 percent decline with an increase of 1.3 percent.

According to Retail Metrics, which also includes warehouse club operators like Costco Wholesale Corp (COST.O) and BJ's Wholesale Club Inc (BJ.N) in its grouping, said discounters turned in a 2.9 percent gain in overall same-store sales.

"They continue to benefit from the trade down among consumers looking for better value propositions in this difficult economic environment," wrote Retail Metrics' President Ken Perkins in a research note.

Wal-Mart said same-store sales rose 2.5 percent at its namesake chain and 2.8 percent at its Sam's Club stores, excluding the benefit of higher gas prices, which inflated same-store sales by 2.4 percent.

Net sales in the month ended February 29 rose 8.9 percent to $29.19 billion.

Sales trends in apparel improved compared to the last several months, Wal-Mart said, but the company noted that softness remained in the home goods area, due to the housing market decline and the weak U.S. economy.

Target and Family Dollar also saw strong sales of everyday groceries, but Target said its men's clothing, jewelry and accessories categories suffered.

MIXED MARCH AHEAD

With no silver lining immediately visible, Wal-Mart is forecasting March sales to be in the range of flat to up 2 percent as consumers continue to look for bargains.

"With consumers increasingly concerned about their personal financial status and a higher cost of living, we will continue our commitment to price leadership across all categories," said Tom Schoewe, Wal-Mart's Chief Financial Officer.

Meanwhile, Target and Family Dollar both see declines for March, due to having one less selling day as they plan to close their stores on Easter Sunday, which falls earlier this year.

The holiday, which will be March 23 this year compared to April 8 last year, will aid results in April, both companies said.

Target's forecast calls for a low-single-digit percentage decline in March, while Family Dollar's looks for sales to be down 2 percent to 4 percent.

Wal-Mart shares were up 58 cents at $50.17 on the New York Stock Exchange, while shares of Target were down 60 cents, or 1.1 percent at $52.20. Family Dollar shares were down 45 cents, or 2.2 percent, at $19.63.

(Reporting by Martinne Geller; Editing by Derek Caney)