"I've always been a big fan of putting into the market on a regular basis regardless of what is happening in the overall market," explains Chuck Carlson, long considered one of the advisory industry's leading experts on dividend reinvestment plans.

Here, the editor of The DRIP Investor offers a 10-stock "autopilot" portfolio that is diversified among 10 high quality dividend-paying stocks and requiring a monthly investment of under $500.

Carlson says, "If I've learned anything in the more than a quarter of a century of following the markets, it is this fact - buying stocks when you know you should (i.e. during sharp down moves) is really difficult. Our heads says we should; after all, substantial market downturns create the best values.

"But our emotions usually take control, thus making it very difficult to pull the trigger and put money into the market when stocks are falling.

"That's why I've always been a big fan of 401(k) plans. With these investment vehicles, investment programs are put on 'autopilot,' with dollars being put into the market on a regular basis (usually each paycheck) regardless of what is happening in the overall market.

"Fortunately, investors can duplicate the autopilot feature of 401(k) plans with their DRIP investments by taking advantage of automatic monthly investment features provided by most DRIPs.

Bloomberg News reports that Wal-Mart Stores, Inc. (NYSE: WMT) and Costco Wholesale Corp. (NASDAQ: COST) saw big sales increases in July thanks to $4 gas, while more upscale retailers, such as The Limited Brands (NYSE: LTD), lost business. The stock market is responding to the change and so far this year, Wal-Mart shares are up 27.8% but Costco's have fallen 5.8% (thanks to a profit squeeze due to its gasoline costs rising faster than the price it charges consumers). Limited stock has lost 10.8% during that time.

The details are worth knowing. Wal-Mart sales at stores open at least a year gained 3% while Costco's climbed 10%. Limited, the owner of the Victoria's Secret lingerie chain suffered a 5% decline. But Wal-Mart's results -- while strong -- were disappointing to investors who expected 3.4% growth. What is driving this increasing budget-consciousness? The beginning of back-to-school shopping, the suspension of sales taxes in some states, $4 a gallon gas, 9.6% inflation and seven months of job losses are all combining to push shoppers to discounters and away from pricier retail outlets.

Costco Wholesale Corp. (NASDAQ: COST) warned Tuesday that profit for the quarter ending in August would be "well below expectations." That statement comes as a surprise. The company that should be benefiting greatly from customers buying in bulk and "trading down" to lower-priced goods, issues lower guidance in the thick of a depressed U.S. economy.

The wholesaler said that analyst estimates of a $1 per share profit would not be met, and then quickly talked about how rising energy prices would be to blame. Costco kept its prices steady even as its own costs have risen. It also experienced diminished profit in gasoline sales. The good news is that Costco's same-store sales have not trended downward recently. The company is still making a healthy profit, but the question is why it is holding many prices steady even as costs and transportation backend prices rise?

One answer is Wal-Mart Stores, Inc. (NYSE: WMT) and its Sam's Club operations. While in a Sam's Club just this past weekend to check out prices, I was amazed to see that once inside the store, any semblance to a credit, mortgage and credit crisis was gone. Prices were lower than ever on many items, and Wal-Mart faces the same kind of financial cost pressures as its competitors. It can afford to keep prices lower even through tough times, though. Costco has to keep up, and as a result, its profits will take a hit.

The Associated Press reports that a "Depression Era" mentality is taking hold among consumers. This matters to the overall economy since 70% of Gross Domestic Product (GDP) growth depends on consumer spending. Maybe this is good news because it will make people care more about spiritual matters, and less about material ones.

AP bolsters its consumer mentality shift with excerpts from a Nielsen survey that interviewed 50,000 consumers by e-mail during the first week of June. The survey found that

• 63% of consumers are cutting spending due to rising gas prices, up 18 percentage points from a year ago;
• 78% of consumers are combining shopping trips;
• 52% are eating out less often;
• Consumers are cutting more coupons;
• They do more of their shopping at super centers; and
• They buy less expensive brands.
  

"Finding its way onto the short-term bullish list is discount retailer Costco Wholesale (NASDAQ: COST), our 'focus stock of the week'," says Chris Johnson in his contrarian advisor service, Insightful Investor.

"The warehouse giant is currently seeing a positive mix of technical strength along with growing pessimism that makes it a potential outperformer. Costco is one company that has maintained a level of demand not seen throughout the bulk of the retailing sector.

"COST's core business, which caters to small businesses and households willing to buy in bulk, has maintained strength despite the slowing economy. In fact, the company's latest earnings report, released March 5, beat analyst expectations by 23%.

"Reflective of its fundamental strength, COST's stock price has remained a relative strength leader by trading above its 50-day moving average. The equity has outperformed not only most of its peers in the retail group, but the overall market as well.

With recession fears, housing market worries and credit concerns, retailers have been facing tough times, especially during the holiday winter season of December and January when sales came with weak numbers. But on the heels of these disappointing results, retailers got a beam of hope as February's sales numbers showed a surprising increase.

Encouraging news for retailers showing a rebound in consumer spending during the past month came after world's largest retailer Wal-Mart Stores Inc. (NYSE: WMT) announced a rise of 2.6% for its February same-store sales. The company said that its same-store sales during the period were helped by strong gains from gas, food and flat-panel TVs. Analysts were expecting the retailer show an increase of 1.1% for its same-store sales, according to Thomson Financial.

Among other retailers that showed a rebound in February sales were Costco Wholesale Corp. (NASDAQ: COST) and Saks Inc. (NYSE: SKS), both of which reported stronger-than-expected gains. Apparel retailers Pacific Sunwear of California Inc. (NASDAQ: PSUN) also reported earnings results exceeding estimates of 6% sales growth last month.

For Limited Brands Inc. (NYSE: LTD), though, February didn't come with positive results. The company stated that higher energy and food prices put pressure on consumers who focused on necessities.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.

Shares of warehouse club operator Costco Wholesale Corp. (NASDAQ: COST) are lower this morning, despite posting an increase of 31% in its fiscal second-quarter profit.

For the quarter, the largest U.S. wholesale club reported that its profit surged to $327.9 million, compared with $249.5 million in the same period a year ago. Last-year earnings included $53.4 million related to non-recurring charges. Higher gasoline prices boosted the company's profit in the quarter and Costco posted earnings of 74 cents per share, which was in line with analysts' forecasts.

Costco also announced a respectable 12% increase in revenues, to $16.62 billion, up from $14.80 billion a year earlier. Analysts were expecting the company to show $16.85 billion in revenue, according to Thomson Financial.

The market is set for a lower open this morning, and one of the stocks that will be contributing to the slow start will be warehouse retailer Costco Wholesale Corp. (NASDAQ: COST) which is currently trading down slightly over 6% in today's pre-market action.

The company announced its fiscal Q1 earnings this morning and was unable to beat analyst estimates, despite an 11% increase in quarterly profit. For the entire quarter the company showed earnings per share of 59 cents, which was in-line with what analysts had been expecting to see going into today's report.

Despite not being able to outpace analyst estimates for earnings, the company had a pretty good quarter overall. If you take a look at revenues, you see a very respectable jump of 12% in the quarter, which is a great increase, but once again, in-line with analyst estimates.

MOST NOTEWORTHY: Encore Energy, Corporate Executive Board, FTI Consulting and Great Lakes Dredge were today's noteworthy initiations:

• Stanford believes shares of Encore Energy Partners LP (NYSE: ENP) are reasonably valued, and started shares with a Hold rating and $20.50 target.
• The Corporate Executive Board Company (NASDAQ: EXBD) was initiated with a Neutral at Baird, as they have concerns regarding the slowing economy near-term.
• Baird also started shares of FTI Consulting Inc (NYSE: FCN) with an Outperform rating and a $64 target, as they believe the company is well-positioned for continued strong growth driven by positive macro demand and specific company drivers.
• Banc of America initiated Great Lakes Dredge and Dock Corporation (NASDAQ: GLDD) with a Neutral rating and $10 target. The firm believes near-term visibility is closed by an unsettled Army Corps/domestic funding policy and is looking for a more attractive valuation.

OTHER INITIATIONS:

• Jefferies initiated Wal-Mart Stores Inc (NYSE: WMT) and BJ's Wholesale Club Inc (NYSE: BJ) with Buy ratings and a $58 target and $46 target and shares of Target Corporation (NYSE: TGT) and Costco Wholesale Corporation (NASDAQ: COST) with Hold ratings and a $62-$65 target and $66-$69 target, respectively.
• Cisco Systems Inc (NASDAQ: CSCO) was initiated with an Outperform rating at Wachovia.

Costco (NASDAQ: COST) (Cramer's Take) is not just another retailer. It is a better retailer. It is a destination retailer, on the order of a place you go out of curiosity and for entertainment.

It's also a cross between Target (NYSE: TGT) (Cramer's Take) and Wal-Mart (NYSE: WMT) (Cramer's Take). Why those two? Because it has the lowest-cost goods -- that's Wal-Mart -- and it is fun, with a treasure-hunt feel -- that's Target, which updates its merchandise quite regularly.

Costco has a great loss leader: gasoline. It has the best big-ticket items for the lowest prices. Its food selection now exceeds that of any supermarket, and its prices for groceries are much lower (not to mention, it offers free samples). It is a fabulous place to shop for party supplies and for sheer entertainment as well as for single people on the run.

In short, it is different. It is entertaining. Which also means that it should not be a way to judge the American consumer. It is just unlike anything out there. Just look at its latest earnings report.

I have long been a champion of Costco. I am also proud of my Costco membership, and I read the magazine the company sends out to members. I suspect Costco will be the biggest seller of my next book, Stay Mad for Life, due out in December. It is the smartest buyer and the smartest seller.

Remarkable store; remarkable stock. But no gauge of the American consumer at all.

RELATED LINKS:

• Cramer Foresees Bright Future for Corning
• Choose Gold Funds Over TIPS as Inflation-Busters

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.

Earlier this morning, Best Buy Co Inc (NYSE: BBY) let investors and analysts know that even it was not immune to a slowdown in consumer spending. The company reported a nearly 18% drop in Q1 income, reporting Q1 EPS of 39c (vs. Reuters consensus of 50c) and Q1 revenue of $7.93B (vs. Reuters consensus of $7.83B). As a result, the company cut its fiscal-year earnings forecast, and now sees FY08 EPS of $2.95-$3.15 (vs. Reuters consensus of $3.16), down from April's forecast of $3.10-$3.25 per share. Shares of the retailer fell 5% from Monday's closing price of $48.01 to open at $45.61.

Best Buy's disappointing earnings may not be a good sign for retail competitors like Tweeter Home Entertainment Group Inc (NASDAQ: TWTR) - Tweeter filed for bankruptcy last week - and Circuit City Stores Inc (NYSE: CC). Analysts believe the companies are likely to face pressure this year from falling prices of flat-screen TVs and increased competition from other retailers like Wal-Mart Stores Inc (NYSE: WMT) and Costco Wholesale Corporation (NASDAQ: COST) that are increasing their consumer electronics offerings. This morning, following Best Buy's earnings report, Circuit City shares dropped 2.6%; the company is scheduled to report its own earnings Wednesday morning.

Despite a challenging environment, analysts believe Best Buy remains the best-positioned in the consumer electronics segment. Executives, too, are optomistic about the second half of the year, expecting "materially better sales" in home theater and digital imaging, as well as with the company's Geek Squad service. Executives expect flat panels, notebooks and gaming will remain "very appealing." Additionally, the company is planning to expand Apple Inc's (NASDAQ: AAPL) store-within-a-store concept, and anticipates to have just under 300 of these by the end of the year.

While Best Buy's performance and expansion have helped it in this area until now, let's hope that CEO Brad Anderson's comment that the company's strategy is consistent with the long-term results the company hopes to achieve, even if Q1 results may not have shown it, holds true.

Analysis provided by Eric Buscemi of Theflyonthewall.com:

Earlier in the week we blogged about Wal-Mart's Same-Store Sales miss, saying this was not enough information to signal the awful holiday shopping season the market predicted from the indicator. With more information now available, we thought we would review:

• Wal-Mart Stores Inc. (NYSE:WMT) confirmed its preliminary SSS estimate of -0.1%, which at least did not drop further. Competitors Target Corp. (NYSE:TGT) and Costco Wholsesale Corp. (NASDAQ:COST) also announced their SSS numbers, with Target outperforming slightly [+5.9% vs. +5.7%] and Costco underperforming slightly [+5% vs. +5.7%]
• High-end retail looked good, with both Federated Department Stores Inc. (NYSE:FD) [+8.4% vs. +4.8%] and Saks Inc. (NYSE:SKS) [+7.2% vs. +6.8%] outperforming
• Clothing retailers were mixed, with Guess Inc. (NYSE:GES) [+12.1% vs. +5.6%], Pacific Sunwear of California Inc. (NASDAQ:PSUN) [-3.8% vs. -4.6%] and Hot Topic Inc. (NASDAQ:HOTT) [-4.3% vs. -6.8%] beating consensus estimates, while Abercrombie & Fitch Co. (NYSE:ANF) [-3% vs. +3%], Bebe Stores Inc. (NASDAQ:BEBE) [+5.8% vs. +7.9%] and perennial underperformer Gap Inc. (NYSE:GPS) [-8% vs. -5.4%] fell short of their estimates
• Speaking of perennial underperformers, Pier 1 Imports Inc. (NYSE:PIR) [-15.3% vs. -13.6%] and Sharper Image Corp. (NASDAQ:SHRP) [-27% vs. -18%] continued embarrassing their investors.

This adds up to a mixed bag for retailers, with the sector as a whole seeing a good deal of weakness today. This Fly maintains that it is still too early to predict doom and gloom for the whole season, however. The true telling sign for the holiday shopping season will be in consumer electronics, as CIBC World Markets channel checks predict that consumer electronics "won the day" on Black Friday.