There's a chill in the air and a slight up-tick in confidence. Holiday discounts are coming a bit earlier, too. For retailers, this has been a great combination, leading to the second consecutive month in which retail sales increased.

This follows more than a year of drops. Consumers aren't going crazy, but they are loosening their wallets a little bit. Consumer spending accounts for 70% of the U.S. economy, and the coming holiday season is where the action is -- for the retail sector and, consequently, for everyone else.

MOST NOTEWORTHY: Circuit City, Best Buy, COTT Corp and o2 Micro were today's noteworthy initiations:

• Wachovia started shares of Circuit City Stores Inc (NYSE: CC) with a Market Perform rating, citing low visibility into near-term fundamentals and low conviction in EPS.
• The firm also started shares of Best Buy Incorporated (NYSE: BBY) with a Market Perform rating, citing low visibility into holiday sales and product margin trends and valuation.
• Gabelli started COTT Corporation (NYSE: COT) with a Hold rating, as they believe the company's Q3 was disappointing. The firm thinks COTT lacks pricing power, and would look for margin improvement and successful non-carbonated soft drink penetration from the company before recommending the stock
• Thomas Weisel started shares of o2 Micro International Limited (NASDAQ: OIIM) with an Overweight rating and $24 target. The firm believes the company is in good position to compete in the high growth markets of power management, advanced lighting and security and surveillance

• Goldman started shares of Heartland Payment Systems (NYSE: HPY) with a Buy rating and VeriFone Holdings, Inc (NYSE: PAY) and Total System Services Inc (NYSE: TSS) with Neutral ratings.
• Gasco Energy Inc (AMEX: GSX) was initiated with an Outperform rating at Morgan Keegan.
• Morgan Joseph resumed coverage of Stage Stores Inc (NYSE: SSI) with a Hold rating.

From Tommy Hilfiger and Elizabeth Arden to Levi's and Jockey, there is a Houston, Texas firm that specializes in bringing brand name apparel to small towns and communities throughout the U.S.

Stage Stores (NYSE:SSI) is a specialty department store retailer, offering moderately priced brand name and private label apparel, accessories, cosmetics, and footwear in small town and mid-sized markets. Altogether, the chain has 655 stores in 33 states. It operates under the Bealls, Palais Royal and Stage names, throughout the South Central part of the country. In Midwestern, Southeastern, Mid-Atlantic and New England states, the stores fly the Peebles banner.

The firm surprised the Street earlier in the month, when it announced Q4 EPS of 88 cents and revenues of $491.2 million. Analysts had been looking for 87 cents and $488.1 million. Management also guided Q1 EPS to 31-35 cents (26 cent consensus), Q1 revenues to $372-$380 million ($373.97M consensus), FY08 EPS to $1.45-$1.55 ($1.53 consensus) and FY08 revenues to $1.61-$1.66 billion ($1.64B consensus). The stock broke through 90-day, 50-day and 30-day moving average resistance on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys" and three "buys." The SSI P/E ratio (19.03), PEG ratio (1.27), Price to Sales ratio (0.67), Price to Book ratio (1.80), Price to Cash Flow ratio (10.23), Sales Growth rate (17.34%) and EPS Growth rate (95.56%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $16.67 and $23.99. A stop-loss of $20.35 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.