Don't Be Fooled: Retail Sales Were Strong

But it wasn't just the high end that performed well. Discounters were very healthy, with Thomson reporting a collective rise of 5.1% for the group, excluding Wal-Mart.

Wal-Mart reported same-store sales growth of 1.1%, below expectations of 1.4%. Wal-Mart saw strength in grocery (a low-margin business) and continued weakness in apparel and home (high-margin businesses). In June, Wal-Mart expects comps to be flat to down 2%.

Wal-Mart rival Target (TGT Quote) just missed same-store sales estimates of 5.9% growth with a 5.8% comp. But considering last year's 5.7% May same-store sales jump, it's unlikely that many investors will complain. Target projects June comps to be in the 3% to 5% range.

Within the discount group, the performance of the warehouse clubs was very strong. Wal-Mart's Sam's Club recorded a 6.4% rise in comps, while Costco (COST Quote) logged a 7% jump, on top of last year's 10%. Even beleaguered BJ's Wholesale Club (BJ Quote) scored a nice 4.1% rise on the back of 4.2% growth last May.

The department stores were mixed, but the problems appear to be company-specific rather than a macro story.

Macy's (M Quote) saw same-store sales decline 3.3%, steeper than the 1% drop Wall Street anticipated. But that's no surprise; last month I discussed why I thought this company is in for a difficult 2007.