Americans still struggling, gauging by corporate profits

People aren't just shopping more at Family Dollar. They're buying the lowest-priced stuff on its racks.

Pizza Hut was left hungering for sales as consumers sought better fast-food bargains.

Shoppers' financial strain is clear in the latest batch of corporate financial reports this week. The operative word for the American consumer isn't "value." It's "cheap."

"I've never seen a softer U.S. consumer than what we're seeing today, in my career," said David C. Novak, chairman and CEO of Yum Brands Inc., which owns Pizza Hut, KFC and Taco Bell.

It's bad news for investors looking for companies to show strong revenue growth to fuel profits after several quarters of beating earnings forecasts by slashing costs. The only glimmer of hope was a pickup in demand in other countries, providing some evidence that any economic recovery will be led by foreign shoppers.

Yum's 18 percent profit growth in the third quarter was largely fueled by business in China; the restaurant operator warned Wednesday that its fourth quarter will be the low point of its year in the U.S.

Yum's sales were dragged down largely by Pizza Hut. The chain suffered a 13 percent drop in sales at stores open at least a year, in a category where sales have been nearly flat. Pizza Hut charges more for pizza and other items than rivals such as Domino's and Papa John's. Consumers even spent less at Taco Bell, which is more value-oriented. Sales fell 2 percent in

"It's the first time where I've actually seen research show that people are actually cooking more at home" than they say they intend to, Novak added.

Costco reported that food and necessities remained popular with consumers and that new members are signing up because they can now use food stamps at some stores.

"Certainly this economy was a wake-up call," Costco Wholesale Corp. Chief Financial Officer Richard Gallanti told investors Wednesday. "It is not just very low-end economic strata that are using these that typically don't have purchasing power. It's a lot of people that are using this as a source of their overall consumption."

Family Dollar, whose profit rose 13 percent in its most recent quarter, said store-brand products are increasingly popular, so it plans to expand those offerings as well as its food assortment generally. The CEO also said he's seen more "trade-down customers," or middle-income shoppers hunting for discount items.

Aluminum producer Alcoa Inc., the first member of the Dow Jones industrial average to report third-quarter earnings, reported a surprise profit. The company's products are used in everything from autos to food wrap to beverage cans, but its CEO indicated the demand is coming from China, not the U.S.

American consumers, whose spending accounts for more than 70 percent of the economy -- including housing and health care, according to a government measure -- continue to grapple with a weak job market and tight credit.

Shoppers "are dipping their toes in the water," said Ken Perkins, president of retail research firm Retail Metrics. "The problem is American consumers are tapped out."