Walmart and Home Depot Hit Hard

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.)

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.

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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