For retailers that sell everything from toilet paper to refrigerators, 2010 may be more about winning sales from competitors than about getting consumers to buy a lot more of their merchandise. Discounters like Target Corp and Sears Holdings Corp’s Kmart stores posted improved sales performances on Tuesday, 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 percent to 2 percent increase in sales at stores open at least a year for the current fiscal year, compared with a 5.3 percent decline last year.

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

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 percent in the week ended February 20, compared with a year earlier. ICSC research forecasts a 2 percent 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.

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 percent in both total and same-store sales for this fiscal year, while net earnings from continuing operations should rise about 15.5 percent 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 percent. 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 percent. In the past year, Target reduced inventory and touted low prices to win back consumers who stopped shopping in its stores during the downturn. It is also renovating hundreds of stores to add more fresh food and groceries.

Target said the current Wall Street first-quarter earnings estimate is above its own forecast.

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SAN FRANCISCO (Reuters) – January sales at top U.S. retail chains should rebound into positive territory from last year’s decline as shoppers redeemed holiday gift cards and retailers avoided drastic clearance sales.

Retailers ranging from Target Corp to J.C. Penney Co Inc to American Eagle Outfitters Inc will report January sales on Wednesday and Thursday. Sales at stores open at least a year, or same-store sales, are forecast to rise 2.4 percent compared with a drop of 5.7 percent last year, according to Thomson Reuters data.

The figures could mark the fifth consecutive monthly sales increase after a year’s worth of declines during the recession, as consumers slowly return to spending and retailers lower prices to match a more circumspect shopper.

January is seen as the least important month of the holiday fourth quarter, accounting for the smallest portion of its sales. But retailers including Aeropostale Inc, Gap Inc and TJX Cos Inc could raise their earnings forecasts when they report sales results, analysts said, helped by demand from bargain-hungry shoppers and improved margins.

Comments retailers make about sales trends and whether traffic weakened significantly at the end of January will also give clues on how consumers might spend in the first quarter.

Some analysts worry stronger-than-expected holiday sales pulled spending forward and retailers could face an uphill battle luring shoppers in the first quarter, especially if cold weather crimps demand for spring merchandise.

“We want to get a sense of consumer sentiment and their appetite to continue to spend after they just spent quite a bit during the holiday,” said Wedbush Securities analyst Betty Chen.

DISCOUNTERS DOMINANT AS TEEN RETAILERS STRUGGLE

By category, the best sales performance in January is expected to come from discount chains such as Costco Wholesale Corp or BJ’s Wholesale Club Inc, where same-store sales are forecast to rise 4.5 percent. Wal-Mart Stores Inc, the top discounter, no longer reports monthly sales.

Traffic at discount retailers has risen during the economic downturn as shoppers seek bargains on TVs, food and medicine.

But upscale shoppers are once again spending as the stock market stabilizes, Wall Street bonuses bounce back and high-end retailers introduce lower-priced merchandise.

Michael Gould, chief executive of upscale department store Bloomingdale’s, which is owned by Macy’s Inc, told Reuters at the opening of its store in Dubai that the retailer had a “wonderful” fourth quarter in the United States.

“I think January is the strongest month we have had probably in a year and a half,” he said.

Macy’s same-store sale are expected to decline 0.1 percent, compared with a drop of 4.5 percent last year.

The worst performance is expected from teen and child apparel retailers, where sales are forecast to decline 0.8 percent. The category is on track to post its 19th consecutive drop in same-store sales, according to Thomson Reuters data.

Jharonne Martis, director of consumer research for Thomson Reuters, said retailers were helped by shoppers redeeming holiday gift cards in the month.

“Consumers are spending, but they’re spending on basic necessities or at a discount,” Martis said. “Even though the high-end consumer … is spending a little bit more than they did last year, it’s not as big as we saw back in 2007.”

HO HUM FIRST QUARTER?

Total holiday retail sales in November and December rose 1.1 percent, according to the National Retail Federation, beating the trade group’s forecast for a 1 percent drop.

Retailers prepared for muted demand this holiday season by stocking less merchandise, allowing them to avoid profit-crunching price cuts in January.

“They were not very aggressive on their promotions, so that should help many of them raise their EPS guidance,” Chen said.

But the outlook for 2010 is muted. The NRF expects sales to rise 2.5 percent. Aside from the past two years, that would mark the lowest year-over-year increase since 1995.

Martis said unemployment could derail same-store sales if it ticks higher. Chen said retailers need to show they can do more than simply stabilize sales to win investors’ favor, including reversing a trend of declining traffic in January.

“What we’re going to need is a top line recovery in order to deliver earnings growth above last year’s results,” Chen added.

(Reporting by Nicole Maestri; editing by Andre Grenon)

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NEW YORK (Reuters) – Family Dollar Stores Inc (FDO.N) reported a higher-than-expected quarterly profit as the discount retailer drew more shoppers, and it forecast earnings for the current quarter above Wall Street estimates.

This quarter began on November 29, and Family Dollar estimated that sales at stores open at least a year rose 4 percent in the busy holiday shopping month of December.

The North Carolina retailer, which sells most of its merchandise for below $10, said net income rose 14 percent to $67.6 million, or 49 cents per share, in the first quarter that ended November 28 from $59.3 million, or 42 cents per share, a year earlier.

Analysts on average were expecting earnings of 47 cents per share, according to Thomson Reuters I/B/E/S.

Last month, Family Dollar reported that first-quarter net sales rose 3.9 percent to $1.82 billion, while same-store sales rose 2.4 percent — below its estimate for growth of 3 percent to 5 percent.

At the time, it said it still expected earnings to fall within its forecast of 45 cents to 50 cents per share.

For the second quarter, the retailer forecast same-store sales would rise by 2 percent to 4 percent, and that earnings per share would range from 65 cents to 70 cents. Wall Street analysts are forecasting a profit of 64 cents per share during the current quarter.

For the full fiscal year, Family Dollar forecast net sales will rise 4 percent to 6 percent, with earnings per share ranging from $2.15 to $2.35.

The company’s shares rose $1.51, or 5.5 percent, to $29.00 in premarket trading.

(Reporting by Phil Wahba and Nicole Maestri; Editing by Lisa Von Ahn)

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