Had any doubt that the market is especially skittish about retail?

Just ask the folks at

Ames

(AMES)

. On Thursday, the chain of regional discount stores reported a second straight month of slow same-store sales. That underperformance will cause a greater-than-expected first-quarter loss, the company said. And that news sent the company's shares down 30%.

Ames had pretty lousy timing. On Wednesday,

Goldman Sachs

downgraded the retail sector, saying that slower consumer spending will make it hard for companies to beat earnings estimates. Retail shares, which have been falling all year on just those concerns, took another tumble yesterday. And April sales were

expected to be bad across the board, thanks to inclement weather on the East Coast.

Small Fry

But Ames' news was worse than most. It said same-store sales rose 4.1% in April. Moreover, slow sales and a hit to margins will make its first-quarter loss "significantly greater" than analysts' estimates. Analysts surveyed by

First Call/Thomson Financial

had expected a first-quarter loss of 49 cents a share.

Banc of America Securities

analyst Thomas Tashjian, who rates Ames shares a buy, increased his estimate to a loss of $1 a share following today's report. His firm has done banking for the company.

Investors have been punishing Ames all year; its shares are 78% off their 52-week high of 48 7/8. Though the feared consumer slowdown would, in theory, hit discounters less than department stores, the Northeast discount-retailing market isn't an easy one: weather-sensitive and, until recently, very crowded. A shakeout in the early 1990s eliminated most of the independent discounters except for Ames and

Bradlees

(BRAD)

. Both, like now-defunct

Caldor

, spent some time under Chapter 11 bankruptcy protection.

Compare Ames' showing to that of

Family Dollar

(FDO)

, which operates in the Southeast. It reported a 12.5% increase in April same-store sales, and its shares are up 20% so far this year. It now trades at 21 times trailing earnings, compared with Ames' price-to-earnings ratio of 5.

My Ames Is True

Not only does Ames compete in a tough market, there's also little in its store base to make it an attractive takeout candidate for a national chain like

Target

(TGT) - Get Report

,

Wal-Mart

(WMT) - Get Report

or

Kohl's

(KSS) - Get Report

, says one hedge-fund manager who used to have a short position in Ames. Its stores are far smaller than those of bigger chains; they would have little to gain by snapping it up for the real estate.

Moreover, says the hedge-fund manager, it's tough to compete on price with big national players and warehouse stores like

Costco

(COST) - Get Report

and

BJ's Wholesale Club

(BJ) - Get Report

. Tashjian says that there's very little overlap between Ames and the larger discount retailers.

In a prepared statement, Ames Chairman and CEO Joseph Ettore said that while weather hit sales of patio furniture, grills and other seasonal items, Easter merchandise sold out. "We will be well-positioned to meet our customers' needs as the weather warms up in May," he said. Tashjian agrees. Not only will sunshine help sales of warm-weather gear, but companies will likely boost sales with markdowns of leftover merchandise from April.

That may not be great for margins, but at least it will theoretically be good for May sales. It had better be. With sentiment shifting away from retail stocks, Ames can't afford another bad month.