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And nowhere is that more evident than in today's retail reports, where a bevy of chain stores reported soft same-store sales. Leading off the bad news was Wal-Mart. The nation's biggest discounter said sales at stores open for more than one year grew just 0.5 percent in August. That's about a percentage point below expectations.
A week ago, Wal-Mart warned Wall Street analysts that August same-store sales—which at one time were projected to be up from 2 percent to 4 percent—would disappoint. At the time, company officials, blaming in part a weak back-to-school shopping season, said growth would be either flat or grow less than 2 percent. Today's results came in below the midway point of that range.
What makes this so meaningful is that Wal-Mart is the single biggest force in the retail economy, accounting for nearly $1 of every $10 in retail sales generated in the United States. Moreover, back-to-school season is considered among the most important windows of opportunity for retailers, second only to the holiday shopping season.
Wal-Mart also began to ratchet down expectations for September same-store sales, in part because of financial stresses among consumers. This not only puts more pressure on the economy to produce more jobs—a key employment report is due out tomorrow—but also to raise household incomes so that the consumer has more discretionary money to spend.
Spending concerns go beyond Wal-Mart. Among the major department store chains, the news was no better. Federated Department Stores (parent of Macy's and Bloomingdale's) saw comparable-store sales fall 2.4 percent last month. May Department Stores (which operates major regional chains like Lord & Taylor, Hecht's, and Marshall Field) saw sales at stores open for more than one year fall 6.7 percent. And same-store sales at Sears were down 6.1 percent.
Specialty retailers got slammed, too. Limited Brands, parent company of such familiar chains as the Limited, Express, and Victoria's Secret, said same-store sales fell 2 percent last month. Comparable-store sales at Ann Taylor, a clothing retailer that caters to professional women, tumbled 4.5 percent in August. And same-store sales plunged 5 percent at Abercrombie & Fitch, a clothing company that caters to the youth market.
For their part, investors are waiting for the other shoe to drop. Later this afternoon, the bellwether technology firm Intel is expected to give Wall Street its traditional midquarter update on business trends. Because of growing signs of weakness in the tech sector, investors will be paying particularly close attention to the firm's outlook on future sales and profits. If retail spending is starting to show signs of weakening, investors will want to see some signs of hope in business spending. Let's hope that Intel can come through.
