Wal-Mart, Home Depot raise outlook

Associated Press

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 that suggests they have no reason to be optimistic. 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 and some were forced out of business.

Merchants are better positioned to weather the downturn now, but Americans have continued to cut back during the painfully slow recovery. Adding to that, recent events have caused consumers to feel even worse about the economy and spending.