Walmart Inc. (NYSE: WMT), the largest retailer in America, and Home Depot Inc. (NYSE: HD), the largest home supply store, both posted disappointing results and forecasts. For retailers in general, the news could not have been much worse. For investors and economists, it is a signal of a slowing economy. In each case, investors believed results would show no recession. (Click here to see which 21 companies make the most profit per second.)
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Walmart’s holiday figures were good enough, but its forecast for the current quarter was worrying. For the most recent quarter, revenue was $164 billion, barely above expectations, and earnings of $1.71 per share surpassed expectations. The forecast was for same-store sales that could be up as little as 2%. That can be viewed as slower than inflation.

Home Depot posted $3.30 per share earnings on $35.83 billion in revenue. Both were about as expected. However, the retailer expects flat sales in the current fiscal year.

Between these two companies, revenue is $200 billion a quarter and almost $1 trillion annually. It is hard to say that any other combination better represents the trend in American retail sales.

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Where does this leave the industry? Larger retailers like Best Buy and Target probably also will disappoint. Struggling retailers like Bed Bath & Beyond are closer to disappearing.

After months in which economists expected a recession, the opinion about the trend began to turn more positive. The Federal Reserve started to back off from rate increases. Unemployment was at a 50-year low. Inflation dropped slightly.

Yet, the Walmart and Home Depot numbers show that something negative is happening just beneath the surface of economic data. And, it is not good.

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