Wal-Mart (NYSE:WMT) will release its quarterly earnings report tomorrow, and although the retail giant has seen its stock back off from all-time record highs in May, it has remained a relatively strong investment. But investors should look at the Wal-Mart earnings report not only for insight on the company's prospects, but also for its implications for the broader economy.

Wal-Mart isn't the only retailer in the Dow Jones Industrials (DJINDICES:^DJI), but its massive revenue makes it the natural choice for the venerable market average. With a reputation for appealing to value-conscious consumers, Wal-Mart has benefited in the past from economic weakness driving new customers away from pricier competitors. If the U.S. economy strengthens, though, will those customers return to those other retailers? Let's take an early look at what's been happening with Wal-Mart over the past quarter and what we're likely to see in its quarterly report.

Stats on Wal-Mart

Analyst EPS Estimate

$1.25

Change From Year-Ago EPS

5.9%

Revenue Estimate

$118.57 billion

Change From Year-Ago Revenue

3.7%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

The prospects for this quarter's Wal-Mart earnings
In recent months, analysts have reined in their projections for Wal-Mart's earnings, cutting their July quarter estimates by $0.03 per share and their full-fiscal-year outlooks by $0.04 per share. The stock has also fallen slightly from is levels of earlier in the year, dropping about 2% since early May.

Wal-Mart started the quarter on a weak note after its April-quarter report fell short of what investors had hoped to see. Same-store sales in the U.S. fell 1.2%, with the company's namesake stores posting declines of 1.4% versus just a 0.2% drop for the Sam's Club division.

(NASDAQ:WFM)

Still, Wal-Mart remains controversial as a business. A new "living-wage" regulation in Washington, D.C., would force Wal-Mart to pay a minimum wage of $12.50 per hour -- half again the District's current minimum wage. In response, Wal-Mart has threatened to cut its planned expansion in Washington, which will likely continue to draw the ire of labor groups.

In terms of competition, Wal-Mart faces some obstacles on several fronts. Attempts to improve margins in the grocery business will face resistance from high-end grocery retailer Whole Foods Market (NASDAQ:WFM), given its specialization in the organic niche and the extent to which its reputation relies on premium-quality food products. By catering to a different customer demographic, Whole Foods doesn't face a major threat from Wal-Mart's grocery moves, as its customers are unlikely to defect to Wal-Mart. Moreover, Whole Foods isn't really competing for Wal-Mart's value-conscious customers, either, instead choosing to seek higher-margin business from a more limited customer base. Rival Costco (NASDAQ:COST) is a much larger threat, as the company has managed to sell at prices even lower than Wal-Mart's by emphasizing revenue from membership fees and cutting profit margins to the thinnest possible levels. Moreover, Wal-Mart's wage controversies will paint Costco in a more favorable light, as Costco is well-known for its higher hourly wages.

In tomorrow's Wal-Mart earnings report, focus your attention on same-store sales trends across its various markets. Given somewhat volatile retail-sales figures recently, the state of the U.S. economy is still uncertain, but Wal-Mart should shed some light on how American consumers are truly faring.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale, The Fresh Market, and Whole Foods Market. The Motley Fool owns shares of Costco Wholesale and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.