This is starting to look like deja vu.

About this time last year, investors and analysts were predicting a second-half turnaround in the retail sector. Then came Sept. 11, and while the consumer didn't go into hibernation, retailers certainly didn't enjoy the boom many projected.

Now, as retailers get set to report their second-quarter earnings this year -- along with their accompanying comments on the outlook of the economy -- the second-half turnaround that many had been predicting this summer appears less and less likely.

And it's not just on the margins of retail. On Monday W.R. Hambrecht analyst Bill Dreher downgraded such heavyweights as Wal-Mart ( WMT), Target ( TGT) and Kohl's ( KSS) due to "macroeconomic uncertainty and eroding consumer confidence." He dropped his ratings from buy to hold on all three companies. (His firm has had a banking relationship with Target.)

"We believe the increasingly skeptical equity markets will respond to the eroding macroeconomic environment, consumer confidence and retail-related issues by further compressing these shares' multiples for at least the next two months," he wrote in a note published on Monday. All three stocks have already lost ground this year: Wal-Mart is off 16%, Target has slid 22%, and Kohl's down around 6%.

Indeed, the news has been bad throughout the retail sector over the last week or so. First came earnings warnings from apparel chains Hot Topic ( HOTT), Wet Seal ( WTSLA) and Children's Place ( PLCE). This was followed by an even bigger earnings bombshell from electronics giant Best Buy ( BBY), which sent shares in that company down some 40%.

Then, many major retailers reported weaker-than-expected July same-store sales numbers, which measure activity in shops open at least a year and are a key indicator of the health of the retail sector. Meanwhile, consumer confidence dropped an unexpected nine points in July compared with June.

Wal-Mart, the nation's largest retailer, will report earnings before the open of trading on Tuesday morning. The company's report traditionally kicks off the retail earnings season, and its numbers are viewed by many as a key indicator of the direction of the consumer economy. The reality is, however, that Wal-Mart's results are becoming increasingly less useful as an industrywide predictor.

Wal-Mart reported slightly disappointing sales numbers for July but is still expected to meet, or slightly exceed, the current Wall Street consensus estimate of 45 cents a share, up 22% from the year-ago period. Increasingly, how Wal-Mart fares is not necessarily indicative of how the rest of retail will do, as the company's success often comes at the expense of other chains. Consider this: among the 39 largest retailers, July comparable-store sales rose an average of 2.6%, according to Thomson Financial/First Call. Not bad, until one finds that, after stripping out Wal-Mart's 4.5% gain, the rest of the industry saw just a 1.5% gain.

In addition, while Best Buy, the nation's largest electronics retailer, warned earnings would fall far short of expectations, Wal-Mart said that electronics was among its strongest categories in July, notes Rob Wilson, who runs Retail Stock Investor, an independent research outfit that focuses on retail stocks. On Monday, Merrill Lynch shaved its estimates for Best Buy by an additional 20 cents a share for this year and next.

A perhaps even more disturbing figure is a recent shortfall at warehouse club B.J.'s Wholesale ( BJ). The company reported slowing sales and was forced to lower guidance for both the second quarter and second half of 2002.

The question is, if sales are dismal at even the rock-bottomed priced B.J.'s, why should anyone expect them to be better at higher-priced chains?