It's no secret that Wal-Mart Stores Inc. wants to tap into the cheap-chic retail revolution that turned Target Corp. from a discount house into a hip shopping destination.

Now rumors are circulating that the Bentonville, Ark., retail giant may try to upgrade its dowdy image by buying clothier Tommy Hilfiger Corp., known for its red, white and blue apparel.

Wal-Mart has expressed interest buying Hilfiger, according to a financial industry source. The source, who spoke on condition of anonymity because talks are at an early stage, cautioned that any Wal-Mart deal for Hilfiger remains weeks away and may not happen. Spokeswomen for Wal-Mart and Hilfiger declined to comment on a possible deal, which was reported Monday by Women's Wear Daily.

Hilfiger's sales have been in decline, and the company went on the auction block last month after agreeing to settle a federal tax investigation. Shares in the company spiked Monday after the initial report of a possible Wal-Mart purchase but then retreated. On Tuesday, the shares rose 31 cents, or 1.8 percent, to close at $17.22. Wal-Mart shares dropped 1 cent Tuesday, to $43.10. The financial source said that the formal bidding process for Hilfiger has not yet begun and that Wal-Mart has done none of the exhaustive research required before it could submit an offer.

Nonetheless, retail analysts said going after Hong Kong-based Hilfiger would be in keeping with Wal-Mart's stated mission to attract more affluent consumers and buff its reputation.

"Mass merchandising and discount retailing is moving in a big way toward private labels and exclusive designer brands," said Richard Hastings, a retail analyst at consulting firm Bernard Sands LLC. "That Wal-Mart is rumored to be contemplating something like this is logical, given the trend in the industry."

Wal-Mart became the world's largest retailer by offering discount prices on staples such as shampoo and underwear while opening new stores at rapid clip. But sales have flagged in recent months, and the pace of new store openings has slowed as Wal-Mart runs out of markets to conquer. Wal-Mart reported its smallest quarterly profit growth in four years last month as higher oil and gas prices increased costs and cut into customer wallets.

Meanwhile, Target (widely known among shoppers as "Tar-zhay") has attracted higher-end customers, who are generally less sensitive to gas prices, by introducing product lines from trendy designers, including home furnishings and clothing by Isaac Mizrahi. Target also has focused on slick advertising. The company bought all the ad space in a recent issue of the New Yorker magazine.

Wal-Mart has responded. The company took out an eight-page spread in the September issue of Vogue magazine and has stressed its desire to become a clothes shopping destination. Right now, only 34 percent of Wal-Mart shoppers buy clothes at the company's stores, according to STS Market Research. Wal-Mart remains much better known for its deals on household products.

But while analysts generally agree that Wal-Mart needs to boost its image, several questioned whether Tommy Hilfiger would be the answer. Hilfiger was a hot brand in the 1990s but has cooled considerably since then, analysts said.

The deal may not be a good one for Hilfiger either, according to Kim Picciola, retail analyst at investment research firm Morningstar Inc. She said that Hilfiger has embarked on its own image makeover campaign, highlighted by the company's recent purchase of the Karl Lagerfeld brand, and that signing on with Wal-Mart might not further the company's goals.

"It could be a good thing for Wal-Mart in its competition with Target," Picciola said. "But for Tommy, it seems like it would take away any cachet the company had left. The company really oversaturated itself after the 1990s, and they've been trying to pick up the pieces since then."

Tommy Hilfiger's clothing house, with declining sales and a federal tax investigation, has gone on the auction block.