• by Sarah Mahoney  @mahoney_sarah, February 23, 2010

While there still aren't any rainbows forming over America's shopping centers, a handful of retailers including Macy's, Target and Sears, posted better-than-expected quarterly results on Tuesday. Executives at those chains -- and industry observers -- think that while consumers are still cautiously measuring out their cash, retailers can finally exhale.

"It's safe to say the worst is over for most retailers. And particularly for those outside the home goods area, the tide is turning," Frank Badillo, an economist at Kantar's Retail Forward, tells Marketing Daily. "We're seeing consumers continuing to spend, in much the same way they did in November, December and January, with an increase in demand for apparel and smaller-ticket items."

Macy's, which posted net income of $466 million compared to its $4.77 billion loss in the same period a year ago, says sales declined 1.1% to $7.85 billion, while same-store sales eased just 0.8%. The Cincinnati-based company says its conversion to the MyMacy's program, which allows stores a much greater level of localization, is largely responsible for its better-than-expected results.

"The fourth quarter represented a clear-cut improvement in sales trends from earlier in the year, driven by success from My Macy's, a 26.6% increase in online sales and a rebound at Bloomingdale's," CEO Terry Lundgren told investors during a conference call. "We out-performed most of our major competitors in the holiday season. We believe this momentum will continue in 2010." Still, he was also cautious. "Business feels better, but I'm not going to play ostrich -- macroeconomics do matter," particularly concerns about employment. (He also says the company will soon introduce a major customer-loyalty initiative, in conjunction with Dunnhumby, the British loyalty-marketing firm. Lundgren says the program will be significantly different than those used by other department stores.)

The news was even more upbeat at Target, which reported net income of $936 million for the fourth quarter, compared with $609 million in the same period a year ago. And sales increased 3.7% in the fourth quarter to $19.7 billion, from $19 billion in 2008, with same-store sales gaining 0.6%.

Calling the results "well above expectations," the Minneapolis chain also says it is seeing positive reactions to its new merchandise initiatives, as well as a continued modest recovery in the economy. In a conference call, Kathee Tesija, EVP/merchandising, says those gains are even coming in the home area, a discretionary spending category hit hard during the downturn. "We are definitely seeing home start to turn the corner," she says -- with sales of higher-end brands, including Smith & Hawken, doing well, as well as its lower-price points.

Still, Badillo is quick to point out, retailers specializing in home goods will continue to struggle. "The housing market is clearly not out of the woods yet," he says.

The Home Depot, also reporting fiscal fourth-quarter results, managed to post a 1.2% gain in comparable-store sales for the quarter -- the first in over three years -- while overall sales declined 0.3% to $14.6 billion, and comparable-store sales in the U.S. fell 1.1%. Net earnings for the quarter came in at $342 million, compared with a net loss of $54 million last year.

"Despite the tough economic environment, we were able to make solid progress against our key initiatives in 2009," Frank Blake, chairman and CEO, says in its release. "For the year, we grew U.S. share by more than 100 basis points; we continued to restructure our distribution network, and we enhanced overall customer service."

At Sears Holding Corp. -- a retailer that has struggled more than most in the downturn -- net income rose to $430 million, compared to $190 million in the same period a year ago. And while Sears continued its same-store sales slide, falling 6.1% at Sears' U.S. stores, comparable-store sales at Kmart climbed 1.7% in the fourth quarter -- the second consecutive quarter of gains. Total revenues decreased $33 million to $13.2 billion.