Updated from 2:36 p.m. EST

When the largest retailer in the world slashes its sales-growth estimate during the holiday shopping season, it's time to sit up and take notice.

Despite reports that retail sales were strong on the day after Thanksgiving, results from

Wal-Mart

(WMT) - Get Report

suggest that high fuel costs and an uncertain job market are still weighing on consumers.

Shares of Wal-Mart fell $2.13, or 3.9%, to $53.19 Monday after the company cut its estimate for November sales to just 0.7% from between 2% and 4%. The new forecast implies that sales fell significantly on Black Friday from a year ago, according to Bernard Sosnick, an analyst at Oppenheimer.

"We foresaw sales difficulties for Wal-Mart through the winter due to the squeeze on consumer spending power resulting from higher energy costs," he said. "But post Thanksgiving Day sales were beyond the weakness we had anticipated."

With sales of more than $200 billion so far this year, Wal-Mart represents about 8% of total non-auto retail sales in the U.S., making its results hard to ignore.

Kimberly Greenberger, an analyst at Smith Barney, said she remains cautious on the holiday season "as we await signs weekend enthusiasm will carry forward into December."

According to ShopperTrak RCT, which measures store traffic from 30,000 outlets, retail sales jumped 10.8% on Black Friday to around $8 billion. Meanwhile, Visa said spending on its cards rose 15.5% to more than $4.1 billion. Purchases at discount stores grew almost 21% while apparel, home and garden purchases rose more than 15.5%.

Still, retail sales on Saturday fell 6.5% from a year ago, ShopperTrak said. Over the two day period, sales amounted to $13 billion, up just 3.5% from the same period last year.

"The first two days of the holiday retail season were uneven to say the least," said Mike Niemira, chief economist at the International Council of Shopping Centers. "While the season appears to be off to a rather shaky start with Saturday's sharp decline, 2003 sales for Black Saturday were very strong, making the year-over-year comparison very difficult."

He also noted that the first weekend of the holiday season isn't necessarily a good predictor for the rest of the season. "Factors like weather, discounting patterns, inventory, and general economic conditions come into play," he said.

Official forecasts for the Christmas season certainly look strong. The National Retail Federation projects that sales will climb 4.5% this year. In addition, a survey by the Credit Union National Association found that fewer households are planning to cut back spending.

Richard Hastings, an analyst at Bernard Sands, is looking for around 5% growth over the holidays and said investors shouldn't be overly concerned with disappointing news from Wal-Mart.

"I think what happened to Wal-Mart is specific to Wal-Mart," he said, noting that the company did not offer aggressive discounts like some of its competitors.

Gary Balter, an analyst at UBS Investment Research, agrees. "This should not be viewed as an indication of weak sales throughout retail land and is not as damaging to Wal-Mart as may first appear," he said.

Balter said that the firm's less aggressive stance on promotions means that profit margins are more likely to be protected. "Wal-Mart has become more of a food store than a gift store with the growth of the supercenter making Black Friday less important," he added.

Retail stocks were generally lower on Monday, with discounters, department stores and specialty apparel names all in the red. Sears fell $1.52, or 2.8%, to $52.78,

Gap

(GPS) - Get Report

lost 39 cents, or 1.7%, to $22.65 and Kohl's lost 95 cents, or 1.9%, to $48. Both

J.C. Penney

(JCP) - Get Report

and

Sears

(S) - Get Report

say they remain cautious about the holidays overall. J.C. Penney closed down 41 cents, or 1%, to $40.15.

With energy prices up more than 50% since last year and tax rebates no longer fueling consumer spending, analysts say retail sales will probably grow at a slower pace this year compared to last. Holiday sales grew 5.1% in 2003 and estimates for this year range from 3% to 5%.

"We do not think last week's disappointing sales

at Wal-Mart are indicative of a material change in the underlying trend," said Patrick McKeever, an analyst at SunTrust Robinson Humphrey. "

But this is clearly a disappointment and cause for some concern about the holiday season."