Retail Looks Shopworn

Target's same-store sales growth dropped to 1.3% for the month, down from 8.2% in March and 9% in February. The drop-off marks a significant departure from the company's historical average. Meanwhile, Wal-Mart posted a same-store sales gain for its U.S. operations of only 0.9% in April, after the previous two months showed uptrends of 4.1% and 4.3%, respectively.

Despite the disappointments from the two heavyweights, the government said retail sales rose 1.4% in April, exceeding estimates from economists on Wall Street. Also in the plus column, the International Council of Shopping Centers said its tally of monthly sales reports from retail chains exceeded its expectations, with the overall index showing a 2.2% gain. Still, that marked a slowdown from March, when same-store sales rose 4.3%, according to the council.

Elsewhere, Lowe's missed Wall Street's estimates by 2 cents, albeit with a 31% jump in profits. Investors bid up the stock, reflecting faith in the home-improvement market that is expected to benefit from demographic shifts and increased immigration levels. That faith appeared justified when Home Depot (HD Quote) said it beat estimates and reaffirmed its full-year guidance.

Even with its success, thanks largely to cost management and product mix, Home Depot acknowledged that retailing has gotten harder.

"While fuel prices may have affected the number of store trips from customers, we have not seen an impact of fuel prices on average ticket sales," said Home Depot's president and chief executive, Bob Nardelli. "We view this as evidence of our ability to execute in a difficult retail environment."

Two department store retailers joined Home Depot as standouts for the sector. J.C. Penney (JCP Quote), still in the groove after its successful turnaround efforts, said its quarterly earnings quadrupled from a year ago, and it offered second-quarter guidance in line with Wall Street's estimates.