Merk Investments: Chain Store Sales Up 3.6%

Aggressive discounting combined with an extra shopping day for the month induced by the Easter holiday drove same store sales up 3.6%, well above the 2.2% market consensus. However, with the exception of the outsized 23.9% increase in purchases at Saks, the primary focus of consumption was directed at lower end discounters such as Wal-Mat, Sam’s Club and Costco. Consumer purchases of dry groceries, consumables and health related items suggest that the headwinds caused by escalating headline prices and declining purchasing power. Demand for consumer electronics, apparel and housing related items remain weak.

Although, the data was a positive surprise that is the major catalyst behind a rise in equities, we do think that the increase in demand for basic necessities changes the equation for corporate profits in the second quarter of 2008. The economy will continue to sag and consumers will remain under duress from higher pries and declining prospects in the labor market throughout the remainder of the year.

Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author.  It is based upon sources and data believed to be accurate and reliable.  Opinions and forward looking statements expressed are subject to change without notice.  This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.