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Is the Big Walmart Warning a Bearish Sign?

In case you missed it over the holiday weekend, Walmart (NYSE:WMT) is worried about the state of things.

Very worried.

According to corporate e-mails obtained by enterprising journalists at Bloomberg, sales are “a total disaster.” Walmart VP Jerry Murray said on Feb. 12 that this is “The worst start to a month I have seen in my ~7 years with the company.”

So what’s the story here? Is this just an overblown email or a sign that WMT — and even the broader retail sector — could be in store for very ugly Q1 sales when we get the numbers?

Big-Picture Pressures on Consumers

While the S&P 500 is up over 7% in the last six months, Walmart is in the red about 4%. But it’s not just WMT that’s hurting — discounters Dollar Tree (NASDAQ:DLTR), Family Dollar (NYSE:FDO) and Dollar General (NYSE:DG) are all down by double digits in the same period.

That’s because of troubles on the consumer spending front that include:

Some of this data might have been masked by recent strength in other reports. The stock market marches higher, the housing market continues to firm up and a host of big-name buyouts are making headlines.

But don’t forget that lower-income consumers are a huge source of demand with their regular expenses on staples like food and clothing. The weakness at discounters including Walmart seem to reflect some softness on this front.

But There’s Hope

Of course, Walmart emails don’t tell the whole story. After all, in the past 10 years, WMT stock is up just 40% vs. about 125% for rival Target (NYSE:TGT). There are many consumers who won’t shop at Walmart and happily take their dollars elsewhere. The company logged about two full years of same-store sales declines across 2010 and 2011 … so something larger is at play here for WMT.

Consider that the SPDR S&P Retail ETF (NYSE:XRT) is up about 10% in the past six months and 15% in the past year to outperform the broader S&P 500 index. Sure, the fund contains some ugly merchants like Best Buy (NYSE:BBY) and Supervalu (NYSE:SVU) that have dramatically underperformed. But its wide net also includes some big winners like turnaround apparel stock Gap Inc. (NYSE:GPS), which has soared 40% in the last year.

In short, while consumer softness is noteworthy, it’s not the whole story. Plenty of retail stocks and discretionary plays are doing just fine. And if you’re a long-term investor banking on a recovery in the next 18 months or so, panicking because of some leaked emails could be very counterproductive.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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