Updated from 7:30 a.m. EST

The economy may be rebounding, but


(WMT) - Get Walmart Inc. Report

is not seeing much of an upside.

That was the message the company conveyed to investors in its quarterly report on Thursday. The nation's leading retailer not only missed Wall Street's third-quarter estimates, it also warned that its fourth quarter will likely come in lower than analysts' forecasts.

"I don't think consumer spending is slowing but I also don't see the strength that many of you in the investment community appear to see," said company CEO Lee Scott on a recorded conference call.

"I believe this holiday season will be better than last year, but a lot of the improvement will be due to easier comparisons. We are still seeing cautious customers who are buying at the opening price points and who are timing their spending around receipt of their paychecks, indicating liquidity issues. "

Investors appeared to take Scott's words and the company's report to heart on Thursday. Wal-Mart's stock was down $2.10, or 3.6%, in recent trading.

But investors seemed divided over whether the problems at Wal-Mart were company-specific or an indicator of the broader economy.

Some took the view of Fran Radano, a buy-side analyst with Gartmore Global Investments. As a discount chain, Wal-Mart benefits during economic downturns when consumers are trying to pinch pennies, Radano said. But when consumers have more cash in their pockets, they are less likely to shop at the store, he said.

"People tend to look at Wal-Mart as a retail proxy, but it's not going to participate in the big upturns in the market (with) highly discretionary goods," said Radano, whose company is underweight Wal-Mart's stock.

But others think Wal-Mart's problems may indicate a broader weakness in the economy. The signs of a rebound in consumer spending have been preliminary, said Heather Brilliant, who covers the company for Morningstar.

"I've been cautious about the consumer coming back," said Brilliant. "No one knows the consumer like Wal-Mart. The fact that they're concerned should raise some red flags in the industry."

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(Morningstar does not do investment banking and Brilliant does not hold Wal-Mart shares.)

In its third quarter, which ended October 31, Wal-Mart earned $2.03 billion, or 46 cents a share, on revenue of $63.04 billion. That compared with the year-ago period, when the company earned $1.8 billion, or 41 cents a share, on revenue of $55.77 billion.

The year-ago numbers include results from McLane, a wholesale grocery distributor that Wal-Mart sold to

Berkshire Hathaway


earlier this year. Excluding McLane, Wal-Mart would have earned $1.78 billion, or 40 cents a share.

The results fell a penny of Wall Street's earnings estimates. Analysts polled by Thomson First Call were expecting the company to earn 47 cents a share on revenue of $62.34 billion.

For the fourth quarter, Wal-Mart projected it would earn 63 to 65 cents a share on same-store sales growth of 3% to 5% at its U.S. stores. Wall Street had forecast that the company would earn 65 cents a share in the quarter on overall sales of $74.5 billion.

In the third quarter, Wal-Mart posted retail sales of $62.48 billion, an increase of 13% over the same period last year. On a same-store sales basis, which compares like outlets open for more than one year, the company's sales increased 6.1%.

But the company apparently bought some of that same-store sales increase through an increase in markdowns. The company's gross profit margin, which is the difference between what a company charges customers for its products and what it pays suppliers for them, decreased by 9 basis points as a portion of sales.

On the conference call, Scott said the company used "heavy markdowns" to clear inventory in the quarter. Although the inventories are back in line, Scott warned that the company may have to continue to resort to markdowns to clear merchandise.

"Customers' cautious spending results in higher sales for the opening price point products and pressure on our margins will continue," Scott said.

After losing ground on its operating expenses for much of this year, the company gained ground in the third quarter. Such expenses fell 7 basis points as a portion of sales to 18.16%. Company officials attributed the decline to "better labor management" and a drop in bonus accruals.

But the overall rise in expenses meant that sales growth outpaced earnings growth in the quarter, a fact that is concerning investors and analysts.

"The whole leverage story hasn't been working yet at Wal-Mart," said one buy-side analyst who asked not to be named. "It probably makes sense to underweight the stock," added the analyst, whose firm is long Wal-Mart shares.