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U.S. sales are expected to have continued to decline in the third-quarter. But just how much of a sales decrease will investors accept?

The third-quarter will mark the sixth consecutive quarter of falling U.S. comparable sales for Wal-Mart, as new Chief Executive, Bill Simon, unwinds the mistakes of the past year.

Through its Project Impact initiative, Wal-Mart removed hundreds of items from the shelves it deemed unprofitable and discontinued its "Action Alley," wide aisles filled with discount merchandise.

The initiative received significant back lash from shoppers, who complained they were unable to find the items they wanted. As a result, Wal-Mart is now restocking some of these items and bringing back "Action Alley." It is also growing categories like apparel and home goods, two divisions it shrunk significantly amid the recession. The retailer will go back to providing apparel basics and offer more plus sizes.

Wal-Mart is also returning to its strategy of "everyday low prices" after testing aggressive rollbacks that failed to incite an uptick in traffic.

Wal-Mart has said that as it corrects these mistakes it expects U.S. sales to turn positive in the fourth quarter. But analysts are skeptical.

The world's largest retailer is going head-to-head with other big-box stores to snag shoppers' dollars ahead of Black Friday. Wal-Mart has already marked down popular electronic and toy merchandise throughout November and rolled out a free-shipping offer.

The company also said on Monday that it will open its doors at midnight the day after Thanksgiving for its "Open House." In the wee hours it will offer deals on popular toys, apparel and home goods and then at 5 a.m. kick off its electronics event.

These door-buster promotions and significant discounts are raising a red flag on Wall Street.

"To be honest, I was rather surprised they

forecast positive fourth-quarter sales on the second-quarter earnings call given the amount of changes occurring at the store level and internally," Wall Street Strategies analyst, Brian Sozzi says. "Do I think a positive comp is likely? I think Wal-Mart will be hard pressed to drive that type of comp in light of the discounts they are bringing out for the holiday season."

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The worst thing that can happen for Wal-Mart is a possible cut to the fourth-quarter sales outlook. Sozzi says Wal-Mart will most likely leave its positive sales guidance out there, but add a qualifier that it may be tougher to achieve this goal given internal initiatives underway and the competitive environment.

In an effort to distract investors from its sales slump, Wal-Mart has been keenly focused on international growth. During the quarter, the company announced plans to bid for South African retailer Massmart and is also on the hunt for acquisitions in Japan.

On average, analysts are forecasting Wal-Mart earnings of 90 cents a share on revenue of $102.43 billion. This compares with a profit of 84 cents in the third-quarter last year.

Wal-Mart's competition is strengthening, as


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, wholesalers like


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and even the dollar stores, encroach on Wal-Mart's let-down consumer base.

Target, which is scheduled to report its third-quarter results on Wednesday, has seen a quicker recovery in its sales. The company reported a 1.7% uptick in October comparable sales, beating Wall Street's forecast of a 1.5% increase.

Still, these results came in at the low-end of management's own estimates, as the company continued to see softness in its apparel business.

In October, Target launched a new discount program, which offers a 5% savings on most products when shoppers use a Target card. Investors will be interested in initial color on the success of the loyalty program and how much it is expected to boost holiday sales.

Target is also looking to steal market share as it revamps its stores, with new electronic areas (now carrying the iPad) and the continued growth of its P-Fresh grocery segment.

For Target, Wall Street has predicted a profit of 68 cents a share on revenue of $15.61 billion. This compared with a profit of 58 cents a share on revenue of $15.28 billion in the year-ago period.

-- Written by Jeanine Poggi in New York.

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