Target (TGT) fell to a 52-week low recently, as the company's shares shed nearly 5% on news of weaker same-store sales. The company lowered its July same-store sales guidance from a 4-6% rise to the 3-4% range. The company did not issue any further details or reasons for the reduction in guidance.

In response to the forecasted decline, AG Edwards cut its recommendation from buy to hold, along with its 2007 full-year earnings guidance, which it cut to $3.06 from $3.10.

Target has been a strong performer in the retail space over the last few years, and its shares have nearly doubled from the lows it posted at the start of 2003. This is, in part, due to the strong operational performance of the company in 2005, which saw revenue and earnings increases of 12.3% and 27%, respectively. Target has also benefited from the weakness Wal-Mart (WMT) displayed over the same period, as employee costs and decreasing margins have plagued the world's largest retailer.

Recently though, shares of Target, along with the retail sector overall, have faced pressure as concerns of an economic slowdown have increased due to higher energy prices, and continued interest rate hikes. It is becoming more and more likely that consumers will start to feel a real pinch at the register and reduce their spending. This will only continue to hurt Target and other retailers.

Of course, when investors look for shelter during periods of economic downturn, consumer staples are often considered the first line of defense. With Target and Wal-Mart being discount retailers, they sell a large number of consumer staples, there is an argument that they could be good investments during times of an economic slowdown.

But in reality, it would be a difficult case to make, as both retailers' main demographics are those who would be hit hardest by increasing living costs, which will likely lead to continue same-store sales declines, and pressure on the companies shares. Within the retail segment, however, these companies will likely be the best bet, as other companies are much more susceptible to the downside effects of economic slowdowns.

For example, electronic retailers such as Best Buy (BBY) and Circuit City (CC) would likely be harder-hit as consumers put off the purchase of high-end TVs, which have been a strong performer for both companies in the past year. Concerns should also be placed towards the home improvement retailers such as Home Depot (HD) and Lowe's (LOW), as homeowners would likely put off renovation plans.

If you think that an economic slowdown is a foregone conclusion, you are likely to do better playing the more notable defensive industries. Look for companies within the pharmaceuticals industry, such as Johnson & Johnson (JNJ) and Proctor & Gamble (PG), or within the food industry such as Kroger (KR) and Safeway (SWY).

In the short term, it may be wise to avoid the retail sector and have a wait and see attitude.