The benchmark S&P/ASX200 index was down 109.9 points, or 1.53 per cent, to 7,072.8 at 1235 AEDT on Thursday, while the broader All Ordinaries had dropped 115.2 points, or 1.55 per cent, to 7,311.4.
Target Australia owner Wesfarmers dropped 7.0 per cent to a one-and-a-half year low of $46.29, JB Hi-Fi was down 6.3 per cent to a five-month low of $45.97 and Harvey Norman had dropped 5.5 per cent to a nearly two-year low of $4.325.
Rebel Sport, Supercheap Auto and Macpac owner Super Retail Group dropped by 5.8 per cent to a one-year low, Myer was down by 3.5 per cent to a two-month low and City Chic Collective dropped by 6.5 per cent.
Consumer staples stocks were also battered, with the sector down 4.1 per cent.
Woolworths fell by 5.9 per cent to a two-month low of $35.27, Coles down 3.9 per cent to $17.74 and IGA supplier Metcash dropping 4.7 per cent to a two-month low of $4.37.
"Consumer spending stocks have been beaten with an ugly stick," Saxo Markets Australian market analyst Jessica Amir told AAP.
In the US, Target Corp's shares on the New York Stock Exchange fell by 25 per cent to a nearly 52-week low after the national retailer missed its profit expectations by wide margins, a day after Walmart did likewise.
Both cited rising fuel costs, higher inventory and inflationary pressures.
The two companies were much bigger than Australian retailers, Ms Amir noted. "The margin of what is happening is huge," she said.
All sectors save healthcare, which was buoyed by CSL, were in the red.
The big banks were all lower, with Westpac falling four per cent to $23.46, while ANZ and CBA were both down more than one per cent.
The heavyweight mining sector had fallen 1.7 per cent, with Rio Tinto down 2.0 per cent to $106.64, Fortescue Metals down 2.1 per cent to $19.36 and BHP down 1.7 per cent to $46.20.
Goldminers were a rare bright spot on the market, with Northern Star and Evolution both up 1.8 per cent, and Newcrest rising 0.2 per cent.
Aristocrat Leisure rose 4.9 per cent to $33.15 after the gaming company said it would begin a $500 million share buy-back program next month.
Woodside Petroleum was down 2.7 per cent to $29.94 as shareholders debated the company's $41 billion merger with BHP Petroleum at Woodside's annual general meeting in Perth.
The Australian dollar was buying 69.69 US cents at noon, down from 70.12 US cents at Wednesday's close.