Wal-Mart, Target Sales Slump

Stimulus boost cools.

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If it seems like we've been harping on problems in retail stocks lately, it's because through all the noise about banks and housing, the consumer is still the biggest driver of economic growth.

Today, Wal-Mart (WMT) and Target (TGT) both showed that shoppers are pulling back.

Wal-Mart, the nation's largest retailer, managed a 3 percent gain in July but said sales this month won't be as rosy. CEO Eduardo Castro-Wright noted that many shoppers are holding back on spending until payday.

At Target, which has struggled to grow all year, July sales dropped 1.2 percent. The company predicted another decline in August.

The monthly tallies for both Wal-Mart and Target were worse than expected. That hints that shoppers are finally starting to cut back on spending, with little relief in sight as unemployment creeps up and incomes stagnate.

Even Wal-Mart's lead on low prices failed to keep shoppers coming back, although a 10 percent jump in monthly sales by rival Costco (COST) shows that there is room for some stores to make respectable gains.