NEW YORK - Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and Target Corp. (TGT.N: Quote, Profile, Research) posted better-than-expected quarterly earnings on Tuesday, but the world's biggest retailer promised deep holiday discounts for consumers who are still feeling pinched -- which could spell trouble for other retailers.
Wal-Mart, whose shares rose 2 percent in morning trading, said it would implement its "most aggressive pricing strategy ever" for the key holiday shopping season. The retailer said it expects fourth-quarter sales at stores open at least a year to be up 1 percent to 2 percent and that price cuts on items like toys and electronics were already drawing shoppers.
While Wal-Mart's plans could generate sharply higher traffic, other retailers' shares suffered on Tuesday as the prospect of having to compete against deep discounts from the leading retailer spread little cheer throughout the sector. For example, consumer electronics retailers, who stand to lose sales of hot items such as flat-panel televisions to Wal-Mart, saw their shares fall.
Circuit City stock fell 4.4 percent to $23.79 on the New York Stock Exchange while shares of Best Buy Co. Inc. (BBY.N: Quote, Profile, Research) and RadioShack Corp. (RSH.N: Quote, Profile, Research) each slipped less than 1 percent to $52.21 and $17.22, respectively.
Tom Schoewe, Wal-Mart's chief financial officer, said consumers were still concerned about energy prices, even though gasoline costs have come down from a late-summer peak, and a sluggish housing market.
"At the end of the day, our customer is looking for value," he said. "That's what is going to make or break our fourth quarter."
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