Cited: Reuters

It seems that consumers are still wary even though retail results have improved. This year for retailers may be more about winning sales from competitors than gaining customers to purchase more, at least for those that sell everything from torn paper to refrigerators

Discounters like Target Corp and Sears Holdings Corp’s Kmart stores posted improved sales performances on February 23, while home improvement retailer Home Depot Inc and department store chain Macy’s also forecast better sales in 2010.

Many of them saw demand pick up for items that sat out the recession on store shelves, but cautioned investors that they don’t expect a huge improvement in sales trends this year while unemployment remains high.

“You are going to see these times where you have consumer explosions, where business will pick up for five or six days, but then they are going to go down again to lower levels,” said Britt Beemer, founder of America’s Research Group, which monitors consumer sentiment.

That raises the competitive stakes for store chains, whose investors are focused on seeing better sales after more than a year of cost-cuts and store closings.

“While we still see little meaningful near-term improvement in macro-economic conditions, we do believe there is opportunity to gain market share by increasing same-store sales,” said Macy’s Chief Executive Terry Lundgren.

Lundgren’s view was bolstered by a new survey that showed U.S. consumer confidence fell in February to the lowest in 10 months, as consumers’ short-term outlook for the jobs market worsened, according to the conference board.

Macy’s nevertheless said it expects a 1% to 2% increase in sales at stores open at least a year for the current fiscal year, compared with a 5.3% decline last year.

Shares tracked by the Standard & Poor’s Retail Index were off 0.2% in afternoon trading. Target slipped 0.8% and Sears 1.3%, while Macy’s rose 1.3%. Home Depot, whose quarterly results suggested continued gains against rival Lowe’s Cos Inc, rose 1.9%.

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SHOPPING FOR MORE PAINT

One positive sign is that customers of both Home Depot and Lowe’s were more willing to spend on big-ticket home projects such as painting, new flooring and renovating kitchens after a prolonged slump in the U.S. housing market.

Home Depot posted its first quarterly same-store sales rise in nearly four years.

Target has seen customers adding a few more home improvement and apparel items to their baskets, not just buying essentials like food, and expects sales of such discretionary merchandise to improve.

“Today, guests are telling us they’re increasingly confident and are visiting more often and shopping more of the store,” Kathee Tesija, Target’s executive vice president of merchandising, said during a conference call with analysts.

But consumer caution was also evident in weekly sales numbers. The ICSC/Goldman Sachs same-store sales index rose 0.9% in the week ended February 20, compared with a year earlier. ICSC research forecasts a 2% rise in February same-store sales overall.

Macy’s posted fourth-quarter profit of $1.40 per share, excluding onetime items, compared with an average analyst estimate of $1.37 per share, according to Thomson Reuters I/B/E/S.

Home Depot posted a profit that beat analysts’ expectations in the quarter, compared with a year-earlier loss. It forecast increases of about 2.5% in both total and same-store sales for this fiscal year, while net earnings from continuing operations should rise about 15.5% to $1.79 a share.

SEARS LOSES GROUND TO HOME DEPOT, LOWE’S

Sears’ profit more than doubled, largely on cost cuts, as its same-store sales still fell 2.5%.

But the Sears chain appears to be losing market share to Home Depot and Lowe’s, which have invested to improve their stores, said Credit Suisse analyst Gary Balter.

“Would you rather be in the lower multiple names that offer better growth or the higher multiple name that, other than some very effective Internet advertising, operates in stores that have been underinvested in for years?” Balter said in a research note.

Target slightly beat analysts’ estimates as it avoided drastic clearance sales that crimped results in the holiday quarter last year. Sales at stores open at least a year, a key gauge of a retailer’s health, rose 0.6%.

Target has reduced inventory and boosted low prices over the past year to get customers to come back and had stopped shopping there during the downturn. Target is also revamping many of its stores to include fresh vegetables and fruit as well as groceries. Target has also stated that Wall Street’s estimated first-quarter earnings estimate is above their own forecast.

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My Take: I stopped shopping at Target and Kmart because their products were so “cheap” and I don’t mean the price. You could find all kinds of gifts like aviation gifts for an outrageous price and we got him home and find out that they weren’t worth it. I know someone that collects brass bells and bought one, it cracked first time she rang it. When she took a look at it, it said “Made in Taiwan”!

Maybe this economic crisis will get them to sell “good” American products that are worth the price they put on them. I know one time both Kmart and Target sold fantastic invitations of all kinds like birthday party invitations and they were worth the money you paid for them. Of course, today, many people want to take advantage of the Internet and get custom design invitations. The same goes with announcements; you could buy beautiful marriage announcements at either store. Here again, people are going to the Internet to get custom birth announcements that are sent directly to their home.

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