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Jennifer Marks

A New Sense of Optimism

Retailers began reporting their third-quarter financials earlier this month, and the results largely seem to follow the pattern we saw with the second-quarter performance: Celebrate the fact that the numbers were less awful than expected; raise the company’s earnings guidance; and warn that business is still bad.

In listening to retailers’ calls with analysts over the past couple of weeks, however, there is one element of the third-quarter discussions that is distinctly different from the second quarter: a sense of excitement. Along with the “we’re still planning conservatively” jabber, there’s now talk about plumper margins, market share gains and operational positioning that’s suited to the economy.

And while most retailers aren’t planning to gin up new store construction right away, several of them have started publicly speculating again about how many stores they could eventually add to their base — and these are not small numbers.

You’d obviously expect enthusiasm at TJX, where third-quarter profit from continuing operations jumped 40%, not to mention Ross Stores, where earnings soared by 83%. But it was also evident at The Bon-Ton Stores ($4.2 million net loss) and ShopNBC ($12.9 million net loss).

There’s an unspoken sense bubbling under the pragmatic strategic discussions that maybe they really have seen the worst, maybe the consumer really is going to keep shopping, even if in a different way (“the new normal”).

Now, from a sheer numbers standpoint, we’re going to have a few quarters of year-ago comparisons that are so ugly even the dumbest cluck in town ought to look like a hero. All those painful, margin-killing clearances of holiday 2008 are going to anniversary themselves out this season.

I don’t want to overstate the optimism. It’s going to be a promotional environment for the foreseeable future. Unemployment levels still stink. The National Retail Federation is standing by its prediction that holiday sales will fall 1%. America’s Research Group, which has a pretty good track record, is even more pessimistic: holiday sales down 2.9%.

Retail execs are talking about at least another year before full recovery; many of them think it will take two.

But the recession era winners are now clear, and others are pushing forward with new strategies to make them more appealing to consumers. We seem to be on our way.

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