Target Corporation (NYSE: TGT) shares fell despite announcing higher-than-expected second-quarter earnings. Earnings for the quarter came in at $0.82 per share on $15.47 billion in revenues, while its retail segment rose 5.7 percent. The catalyst behind the decline is likely the continued talk of a weak and soft sales environment. Moreover, investors were less than comforted with a drop in gross margins and a fall in the profitability of its credit card operations.

Target's net income fell on lower clothing and home goods sales as the government rebate checks begin to wane. The retailer fell behind Wal-Mart Stores (NYSE: WMT) once again as consumers continue to see bargains. Customers that are struggling with higher food and fuel prices, rising joblessness and the worse housing market since the Great Depression are quickly switching their spending from high-class Target stores to discount Wal-Mart stores.

Target may be a good bet over the long-term as the U.S. economy recovers, but until then, Wal-Mart may continue to be the smart bet on retailing. Wal-Mart, Costco, Sam's Club, and various dollar stores have all posted higher than expected sales as consumers rush to spend rebates at their stores. Meanwhile, Target and other higher class retailers are experiencing problems. Shares of Target dropped $0.22, or 0.44%, to $49.82 during today's trading session.

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