Highlighted stocks include Amazon.com (AMZN), BJ's Wholesale Club Inc. (BJ), Carter's Inc. (CRI), Men's Wearhouse (MW) and Target Corporation (TGT)

Initial holiday sales are encouraging, though it is questionable whether the momentum will last or if the discounts will end up hurting profits.

The National Retail Federation estimated that shoppers spent an average of $373.57 over Thanksgiving weekend, an increase of 7.2%. Store traffic was higher as well at 172 million, versus 147 million last year.

comScore calculated that Cyber Monday sales totaled $846 million, a 15% increase over 2007. Nielsen Online said that Monday traffic to online retail web sites was 10% higher.

For both traditional and online retailers, discounts were the name of the game. Stores marked down everything from GPS devices to Jimmy Choo shoes. And many observers, including Zacks' Senior Retail Analyst Rob Plaza, believe retailers will

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Despite the apparent values in retail stocks, there are few reasons to get excited about the retailers. Consumer spending will remain subdued for the next few quarters, and that will lead to retailers' earnings estimates declining for the next several months.

OUTLOOK

The holidays are right around the corner. This is the most important period for retailers, as many generate about half of their annual sales during the holiday shopping season. The way things are shaping up, this may be one of the worst holiday shopping seasons in recent memory.

Economic data from this summer suggest that consumer spending may have turned negative in the third quarter, which means the consumer was in a tough spot before the credit crunch turned into a full-blown crisis. The problems in the credit markets will only exacerbate the problems negatively affecting consumer spending. As a result, earnings estimates for retailers will continue

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Earlier today, Director of Zacks Equity Research, Dirk van Dijk, CFA, posted an entry called 'A Modest Proposal.'  Since then, a couple senior analysts from the department have issued their responses.

Sheraz Mian, senior oil & gas industry analyst: That's an interesting idea, using the $700B to buy common equity. If nothing else, it completely side-steps the thorny issue of pricing the mortgage-related securities plaguing the balance sheets at present. In a way, it is plain-vanilla version of what the 'Oracle of Omaha' did with Goldman (GS).

They key question, however, remains whether so re-capitalized entities will be able/willing to lend. Wouldn't that take us to where the Japanese banking system was in the 90's -- they were well capitalized, but couldn't/wouldn't lend due to their awful balance sheets. After all, they would still be saddled with a whole lot of toxic stuff on their balance sheets -- difficult to price and

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Although BJ's Wholesale Club (BJ) shares missed the Zacks consensus estimate of 57 cents per share by a penny in its fiscal Q209 (ended July) earnings report due only to some one-time items, the market has not been kind to BJ this morning.  Shares are trading down $2.75, or roughly 6.76%, thus far today.

The company even increased fiscal year (ending January '09) guidance by 6 cents, but to no avail.  In a quarter that was supposed to have seen U.S. government stimulus checks give a solid boost to the country's 3rd-largest warehouse retailer, the quarterly report has been met with disappointment.  No fewer than 5 analysts had increased expectations for the quarter within the past month.  The current Zacks consensus for the fiscal year is $2.14 -- right in the middle of current guidance.

With a target price of $42 per share and a Hold recommendation, Zacks senior retail industry

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With several more retailers expected to report quarterly earnings this week, we sat down for a chat with Zacks senior retail industry analyst Rob Plaza, CFA for his outlook on the sector as a whole, and what his top Buy recommendations are.

Wal-Mart had a pretty good Q2. Does this indicate that other retailers should post stronger earnings this week and beyond?

What is good for Wal-Mart (WMT) is not necessarily good for other retailers. Wal-Mart continues to perform well in this environment because of superior inventory management, logistics, and cost controls. This focus on operating costs give the company a huge competitive advantage, and the company passes along those savings to its customers. As a result, consumers shop at Wal-Mart to get more value for their dollar.

That said, Wal-Mart and most retailers should report decent results for the second quarter thanks to the government stimulus checks.

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