With its earnings and sales more or less known, the key thing to look for in Wal-Mart's ( WMT) earnings report on Tuesday is how the company performed on its expenses -- and what it expects for the rest of the year.

Those are, of course, key figures to examine in any company's earnings report. But with Wal-Mart representing more than 10% of U.S. retail sales, excluding sales of motor vehicles, trends at the retail behemoth could well indicate what investors should expect from the rest of the retail industry.

"The retail earnings season starts tomorrow," said Fran Radano, a research analyst for Gartmore Global Investments. "This sets the tone for the next three weeks."

Wal-Mart, which reports weekly and monthly sales figures, has already warned investors of below-plan sales. Benefiting from Easter falling in April this year rather than March last year, the company posted a comparable-store sales increase of 4.6% last month. For the last three months, the company's same-store sales, which compare results at outlets open more than one year, increased 2.5%, compared with a 7.8% increase in the same three months last year.

Despite the disappointing sales, the company reaffirmed its earnings guidance last week, saying that it expects its earnings to come in at the high end of its previously stated range of 40 cents to 42 cents a share.

For the 13-week period ended May 2, which roughly coincides with its first quarter, Wal-Mart posted $58.37 billion in retail sales. That amount does not include membership revenue from its wholesale chain Sam's Club or results from McLane, the grocery distributor that Wal-Mart recently agreed to sell to Berkshire Hathaway.

Analysts are expecting Wal-Mart to earn 42 cents a share on about $60.69 billion in sales, according to Thomson Financial/First Call. In the year ago period, Wal-Mart earned $1.65 billion, or 37 cents a share, on $55.42 billion in revenue.

But the interesting figures could be how the company did on its gross margins and operating expenses such as sales and administrative costs, said Radano. That the company's profits apparently went up despite below-plan sales indicates that its margins improved in the quarter. That could be good not only for a discounter such as Wal-Mart, but other retailers as well, he said.

"It appears that they're going to let their margins drift higher where it makes sense," Radano said.

Facing slow sales and amid economic uncertainty and increasing unemployment, many retailers have been using promotions to draw in shoppers. But such promotions eat away at gross margin, which is the difference between what a company charges customers for its goods and what it pays vendors for them, and bottom-line profits.

Noting that Kohl's ( KSS) warned last week of disappointing earnings and sales, one fund manager, who asked not to be named, said it would be interesting to see where margins improved at Wal-Mart. Kohl's largely deals in apparel; this indicates that such sales probably didn't help Wal-Mart's margins in the quarter, the fund manager said.

"It could be staples, such as batteries," the fund manager said. "I think food and those kinds of things are going to be the driving factor."

While margins likely improved at Wal-Mart, the company's operating expenses may well have taken a turn for the worse during the quarter. Like other company's, Wal-Mart has been facing rising health care costs in recent quarters. Plus, the rise in energy costs prior to the war likely had an affect on its expense structure.

Seeing how Wal-Mart was affected by such costs could well shed light on how competitors will handle them, said Radano.

"They are a bellwether for operating expense trends," he said.

Going forward, analysts expect Wal-Mart to be cautious. The company said on Monday that its Mother's Day sales were below plan.

Meanwhile, retailers as a whole are still facing an uncertain economic environment, the fund manager said. Last week, chain stores largely reported disappointing same-store sales, the fund manager noted.

Wal-Mart has said that it expects to earn between $2 to $2.05 a share for the year. Wall Street projects Wal-Mart will earn $2.04 a share for the year, according to Thomson Financial/First Call.

"They're going to be cautious," the fund manager said. "Everybody's going to be cautious."