retail sales shoppingSeptember retail sales came in stronger than expected, raising hopes for the holiday season. But even with the surprising numbers, most merchants still treading carefully around the consumer.

Comparable sales (for stores open at least a year) rose 2.8% among the country's largest retailers, according to a tally by Thomson Reuters, which also found most merchants beat their own estimates. The majority of analysts had forecast sales would grow in the low-to-middle 2% to 3% range; Thomson Reuters had expected 2.1% growth.

Sales were "surprisingly good, better than I expected them to be," said Joel Alden a principal at consultant A.T. Kearney. He noted that September is the first month this year where the sales numbers are not getting the benefit to a weak performance the year before, like the results in 2009 got from the recession year of 2008.

Retailers Still Cautious

Despite the robust numbers, few retailers took the opportunity to raise their forecasts for their coming third-quarter earnings reports, as analysts had expected.

Macy's (M) which reported a solid 4.8% gain -- thanks to its best back-to-school season in years, according to a statement from CEO Terry Lundgren -- didn't budge. J.C. Penney (JCP), which posted a strong 5%, ahead of its own expectations after struggling early this year, only affirmed it will meet it previous forecast of 16 cents to 20 cents per share in earnings for the third quarter. One retailer that did raise its sights was TJX Cos. (TJX), the parent of discounters Marshalls and TJ Maxx; it now projects earnings of 89 cents to 91 cents per share during the third quarter, a 10% to 12% increase over last year period.

Comments from Kohl's (KSS), which saw comparable sales rise 3%, hint at the retailers' worries. The discounter reporter that while its transactions per store were up in the high single-digit percentages, prices and units per transaction dropped by low single-digit percentages. That hints at a consumer who remain cautious about spending, shopping more but buying -- and spending -- less per trip. Target Corp. (TGT), which posted a disappointing 1.3% sales increase, also found smaller average receipts offset rising store traffic.

The fact that sales have been up and down this year and influenced by retailer's promotions can be making retailers more cautious about their guidance, said Kenneth Stumphauzer, retail analyst at Sterne Agee. But the results were pleasing overall, despite some concerns about bad weather and excess inventory going into September, he said.

In fact, sales have been rising against a grim backdrop of weak housing and credit markets and continued high unemployment. Stumphauzer noted consumer confidence is lower than it ever was since the 2002 recession, near the nadir of the 1991 recession.

"It's improved from the bottom, but it's still at absolutely horrific levels," he said. So the fact that merchants are still managing to stimulate shoppers and post rising sales is a positive for the holiday season, he said.

The Wealthy Abide

A tally from the International Council of Shopping Centers noted luxury was the strongest retail segment this month, with a 6.6% increase, another good sign for holiday. Chief Economist Michael Niemira pointed out the top 20% of households by income account for nearly 40% of total holiday spending, so a continued strong performance in that area is encouraging for the economy and the merchants.

But most forecasts are being cautious, despite the surprises in the monthly reports. Many retailers who forecast October sales had muted outlooks, factoring in strong competition and the need to continue promotions to stir up sales. Additionally, analysts note that macroeconomic indicators are persistently down, including housing, employment and household incomes.

"Some of those macroeconomic factors require cautious optimism towards Black Friday and the holiday," said Alden. "I'm seeing a decent holiday going forward, but I don't think we can be overly optimist."

The recession may be over, but those macro factors are still holding consumers back, said Stumphauzer, who's expecting a modestly healthy 2% to 3% sales growth during the holiday season.

"It's not what you'd like to see this far in an economic recovery," he said. "But given the backdrop we've seen in the last few months, it's a positive,"

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Robert & Lisa

Blind leading the blind. Dumb voting in Dumb. Is it not poetic justice unemployment is highest in the states who supported this idiot and his thug friends?

October 08 2010 at 4:44 AM Report abuse +1 rate up rate down Reply
Robert & Lisa

According to Gallup, unemployment went from 9.3% to over 10% last month for the second time under Obama and thugs. Thanks Demoncrats. You're worse than Bush ever was.

October 08 2010 at 4:40 AM Report abuse +1 rate up rate down Reply
Robert & Lisa

According to Gallup, unemployment went from 9.3% to over 10% last month for the second time under Obama and thugs. Thanks Demoncrats. You're worse than Bush ever was.

October 08 2010 at 4:40 AM Report abuse rate up rate down Reply
Robert & Lisa

According to Gallup, unemployment went from 9.3% to over 10% last month for the second time under Obama and thugs. Thanks Demoncrats. You're worse than Bush ever was.

October 08 2010 at 4:40 AM Report abuse rate up rate down Reply
ultraz2

You have to love it when a story like this says retail sales coming in strong, then they show a store photo with ONLY two people in the foreground and the rest of the store TOTALLY EMPTY of customers. LOL ----IT'S A JOKE STORY RIGHT?

October 07 2010 at 3:04 PM Report abuse +1 rate up rate down Reply
donut999

of course the numbers are going to improve. folks have been putting off spending for so long, some purchases have become non-optional. until the u. s. consumer resumes charging and spending like an idiot, then the economy will remain in the tank.

October 07 2010 at 2:40 PM Report abuse +1 rate up rate down Reply
donut999

of course the numbers are going to improve. folks have been putting off spending for so long, some purchases have become non-optional. until the u. s. consumer resumes charging and spending like an idiot, then the economy will remain in the tank.

October 07 2010 at 2:40 PM Report abuse +1 rate up rate down Reply
bigsal51

You people make me laugh. It's called MARKETING. The idea is first get you in the store and second to get you to spend as much as they can. This is just common sense. I know that the word PROFIT has become a curse word in these UNITED STATES. Have you ever gone into a STORE and have the clerk tell you "I think you have spent enough" I don't think so.

October 07 2010 at 1:51 PM Report abuse rate up rate down Reply