The economic slowdown may finally be affecting discount giants
Both companies reported disappointing sales in August, and Target cautioned that its third-quarter earnings could come in below expectations if sales don't improve. Both stocks fell as the broad market posted a weak session.
Wal-Mart, the nation's largest retailer, reported a 3.8% gain in comparable-store sales, below the company's plan for a jump of 4% to 6%. Target, meanwhile, reported 0.1% decline in same-store sales; analysts had been projecting a 1.1% gain, according to Thomson Financial/First Call. Target also said that if sales continue to be weak, it could come in a couple cents shy of the current consensus earnings estimate for the third quarter of 31 cents a share.
Wal-Mart shares were off lately $1.04 at $51.30. Target was off $1.19 to $33.13.
Many retailers reported August sales Thursday, and the news was pretty grim all around: companies from discounter-department store hybrid
to apparel chain
Abercrombie & Fitch
reported disappointing numbers.
Discounters generally weather economic downturns better than other retailers, and the poor results from Wal-Mart and Target could suggest that the consumer economy will continue to slow down. In recent months, a number of indicators have suggested that consumer spending, which has held up well during the downturn while business investment sagged, may be drying up. Consumer confidence has fallen, and many retailers, such as consumer electronics giant
, have issued earnings warnings.