Retail chains beat their heads against Wal-Mart.

• Position: Wal-Mart Stores Inc.

1996 burst into the street like the bulls of Pamplona. The Dallas Cowboys trounced the Pittsburgh Steelers - yet another National Football Conference victory in the Super Bowl, presaging yet another bull year for stocks.

But while America's team and Wall Street tossed champagne and confetti, working stiffs like Steeler fans and Wal-Mart shoppers faced an endless string of Mondays.

There seems to be money chasing high-priced securities but little left for the daily commodities of life. Stocks are soaring. But retail has slumped everywhere from the suburban malls to warehouse outlets. "We've lost so many high-paying jobs in this country," says Otto Grote, a retail analyst at Derby Securities in New York. "That's what's wrong with consumption."

Even mighty Wal-Mart was humbled by Christmas 1995, with a 9% decline in earnings for its quarter ended Jan. 31. That was especially nasty - the Arkansas retailer was set to celebrate its 100th consecutive quarter of earnings gains.

But if things are bad at Wal-Mart, imagine what they are like at retailers such as Charlotte-based Cato Corp. (CACOA-NASDAQ) and Matthews-based Family Dollar Stores Inc. (FDO-NYSE). After Wal-Mart finishes counting its money, what's left for everyone else?

"To paraphrase Ross Perot," says analyst Kenneth Gassman of Davenport Securities in Richmond, Va., "that giant sucking sound you hear is Wal-Mart," taking sales from all other discounters. "That's who's hurting everyone else."

Yet the story is mixed. Cato and other small apparel chains are struggling, while Family Dollar keeps opening one oversize convenience store after another.

Investors could've made a bundle on Cato late last year. Yuletide woes drove it to a low of $5.13 in October, attracting bargain hunters. The Wall Street Journal, touting stocks that took a hit at Christmas, cited Cato. It reached $10.13 in early April but drifted to $9.50 at month-end.

Cato sells low- to moderate-priced women's apparel in strip shopping centers, often right next to a Wal-Mart in many Southern towns. For a while that proved a winning strategy, especially after Cato engineered a remarkable turnaround six years ago by overhauling merchandising to stress hip, eye-catching fashions.

Now Wal-Mart, like most other retailers, wants to keep its traffic to itself. It's moving in on Cato's market. "Almost everybody is in the business," Grote says. "Pretty soon we're going to see supermarkets selling women's clothes."

The women's-apparel...