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Wal-Mart, Home Depot Roll Out Red Carpet for Tax-Cut Crowd

Facing a sagging consumer economy, two big retailers find themselves in a frenzy to cash in on the Bush tax cut.

For months, investors and analysts have chirped that this year's $38 billion tax rebate could jumpstart lagging retail sales. Now that checks are due to start hitting mailboxes in coming weeks, Home Depot (HD - Get Report) and Wal-Mart (WMT - Get Report) are offering to cash those checks free of charge. In doing so, they hope to grab a bigger share of consumers' windfall.

In a statement issued Wednesday, Wal-Mart, the world's largest retailer, said, "We're providing this service for the convenience of our customer." Of course, the company wouldn't mind if customers dropped some benjamins while they're at it, by converting the rebates into shopping cards or simply using the proceeds to buy merchandise.

Home Depot, meanwhile, recently launched an advertising campaign offering consumers a similar service. This follows a study the company conducted that claimed 30% of the nation's homeowners are preparing to invest their rebates in home improvement.

Home Depot and Wal-Mart were already widely seen as beneficiaries of the tax rebates, which are considered likely to boost spending by lower- and middle-income Americans. Yet the companies' latest efforts suggest they are taking nothing for granted, especially as retail sales continue to disappoint and hopes for a second-half recovery in consumer spending dim.

The tax rebate is the first since 1975. It will put about $300 in the pockets of most single people and give $600 to married couples. If history is a guide, Wal-Mart and other discount retailers could see a boost to their sales and stock prices from the rebates. The 1975 rebate resulted in a sharp spike in consumer spending, driving a 157% spike in Wal-Mart's share price in the first half of that year.

This year Wal-Mart shares are off about 7.5%. They lately traded up $1.18 at $48.68, while Home Depot shares were up 40 cents at $45.40. Home Depot shares are flat for the year.

One of Wal-Mart's chief competitors, Target (TGT - Get Report), won't match the company's offer. Douglas Kline, Target's spokesman, said the company doesn't need to offer consumers anything other than its already low prices.

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