Consumers are finally spending more, with September posting the first gain in more than a year. The International Council of Shopping Centers and Goldman Sachs (NYSE: GS) found that retail sales inched 0.1% higher last month. It doesn't seem like much, but a gain when you anticipate a fall is good news magnified. But, it came at the expense of great deals and other tools to entice somewhat hesitant customers into stores.

Kohl's (NYSE: KSS) and Limited Brands (NYSE: LTD) reported sales increases in September for stores open more than a year. J.C. Penney (NYSE: JCP), Macy's (NYSE: M) and Target (NYSE: TGT) posted declines, but they were better than expected. Delayed school openings thanks to a late Labor Day helped push to September sales that might have occurred in August otherwise.

Of course, all eyes are on the coming holiday season. The National Retail Federation forecasts U.S. consumer spending of $437.6 billion – up only slightly from $433.7 billion four years ago. So, we still have a lot of ground to make up before we can celebrate a recovery. As long as the situation is staying steady, though, we'll at least have a solid starting point.

The retail space is littered with misplaced ideals, impossible ideas, and problematic business models. Hence it is best avoided, given the U.S.'s pronounced recession.

But an opportunity or two still exists for investors who can tolerate high risk, and Kohl's (NYSE: KSS) is one.

In this era of the 'frugal consumer' -- characterized by stagnant median incomes, difficult labor market conditions, and an uncertain economic recovery timetable -- most investors agree the retail sector is best avoid.

But there are exceptions to the rule for investors who can tolerate moderate risk, and Coach (NYSE: COH) is one.

A retail stock? In this economic climate? Indeed, it seems implausible, but an argument can be made -- for those investors who can tolerate moderate risk -- for JC Penney (NYSE: JCP). Here's how:

The recession and the new era of the 'frugal consumer' have really taken the wind out the retail sector's sails, but JC Penney is still standing, and if indeed the recession is beginning to bottom, institutional investors will start to position themselves in the sector in a big way. Indeed, some big investors already have, with JCP's shares already having accelerated out of a $15, 52-week low to trade around $25.

Two weeks ago several analysts speculated that over 70,000 stores could close in the first half of the year and that bankruptcies could force many retail chains to close.

The pessimism about the industry is only growing and it raises the question of whether saving retail is akin to keeping unemployment at reasonable levels. If retail collapses much further, a million jobs could be lost fairly fast.

Adding to the concern about the sector, The Wall Street Journal reports that "Drained by the worst consumer-spending slump in decades and burdened by debt, U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings." That is old news. The way the ripple effect works is not.

Unemployment is rising at over 500,000 jobs a month across all parts of the economy. If a typical store employs ten people, closing 70,000 stores increases the pool of the jobless by 700,000 people all by itself. That does not include the failing of businesses that support retail whether they be in the real estate industry or in the parts of the economy that supply stores with everything from clothing to hardware, books to consumer electronics. Looked at that way, the retail industry could touch the jobs of one million people before the middle of the year.

One thing that the Obama plan does not address is how to keep stores open. There are no tax credits for people to move back to shopping. There are no programs to keep store leases from default the way there probably will be for home mortgages.

A failure to address the retail crisis may end up being remarkably expensive.

Douglas A. McIntyre is an editor at 24/7 Wall St.

If you made a bet on the specialty retailers leading up to the first $600 taxpayer rebate stimulus package, you got hammered.

Talk about a government plan backfiring big time.

That $300 billion in checks that fell out of the sky from government helicopters back in the March to May timeframe didn't find its way to the malls at all.

Instead, people paid down credit card debt, and tuition, medical and other bills, leaving little for spending on non-essentials.

The result was a litany of store closings nationwide, with several old-line, brand-name retailers going out of business.

It's game over for names like Circuit City (OTC: CCTYQ), Cache (NASDAQ: CACH), Talbots (NYSE: TLB), J. Jill, Wickes Furniture, Levitz, Bombay, Linens 'n Things, Movie Gallery, Wilson Leather, KB Toys and The Sharper Image.

Traders that leveraged into darling names, like hedge fund idol Eddie Lampert's Sears Holdings Corp. (NASDAQ: SHLD), got smoked. Shares of SHLD were trading at $105 when the checks when out. Today the stock is around $40.

Even Costco (NASDAQ: COST) -- the obvious slam dunk, aside from Wal-Mart (NYSE: WMT) -- got slammed, falling from $75 to $45 following the so-called stimulus package.

AnnTaylor (NYSE: ANN), whose colleagues include Liz Claiborne (NYSE: LIZ) and Talbots (NYSE: TLB), reported Q2 earnings stats that beat the views of Wall Street. The retailer said it made $0.54 per share in the second quarter versus $0.51 per share earned in the similar period a year ago. These bottom-line results are on an adjusted basis. According to Reuters, analysts were looking for about $0.49 per share. So that's a nice $0.05 beat.

The bottom line may have surprised analysts, but other parts of the story didn't excite me. The top line decreased by almost 4%. Same-store sales took a big dive, declining pretty near 11%. Comps are an important metric for retailers, and a significant decrease like this one always makes investors cautious. Management cited low traffic levels as a driver of the dismal comps. Seems to me like someone at the chain needs to rethink the current marketing campaigns. The gross margin did improve, though, so at least there's that.

After reading through the earnings release, it became quite apparent to me that management is clearly worried about the economy going forward. They're right, I think the rest of the year may indeed be rough on the consumer. With such weak stats, I think it would be hard to make a case for buying AnnTaylor's stock. If you're a contrarian and think the company will consistently beat earnings from this point on, and you turn out to be right, then buying the stock now might make for a good trade. But I'd have to hear good reasons for such a bullish case. I think it's entirely possible that AnnTaylor's shares trend lower from here. No matter what, I won't be putting this retailer on my personal watch list. My advice to the company: get traffic through the door with more innovative promotional schemes.

Disclosure: I don't own any company mentioned; positions can change at any time.

Macy's (NYSE: M) didn't do too well in its second-quarter according to the earnings report, but it did beat profit expectations. Net revenues saw a decline of 3%, coming in at $5.7 billion. Adjusted net income from continuing operations was $0.29 per diluted share. According to this article, the call from the wizards of Wall Street was for $0.19 per share.

That's quite a beat, I'll grant you, but there are some caution signs investors must read regarding Macy's. As the article mentioned, the outlook isn't that great, and the retailer doesn't expect much from same-store sales as it goes into the autumn. In fact, sales should either be flat or will decline slightly. Same-store sales represent an important metric for retail chains, and if that metric can't be delivered, then investors need to take notice. For the quarter, comps were down a little over 2%. Over the last six months, comps were down by roughly the same amount.

Net cash provided by operating activities actually went up 44% to $592 million. The gross margin also improved. Cool stuff, perhaps, but they still don't change my bearish inclination toward the company. Macy's is still trying to turn itself around and become a player in retail, but it will be tough considering the economic challenges that the entire industry is currently facing. It's not going to be a strong holiday season for the company, and in terms of investment ideas, I'd still look at Wal-Mart (NYSE: WMT) or Target (NYSE: TGT) in the retail sector. I don't see any reason to put money to work in Macy's (some do, though, since the stock is up almost 2% as I write this, and it has done very well over the last month, according to the AOL Finance snapshot).

Disclosure: I don't own any company mentioned; positions can change at any time.

This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Needless Markup below in the comments.

Neiman Marcus may be the most successful upscale retail department chain that selected shoppers love to hold a grudge against.

The chain caters to primarily female, upper-income and upper-middle shoppers, and features designer lines that rival boutique (and beyond) price levels.

Further, while some of the products are decidedly exclusive, some are not or appear to not be, according to shoppers, but the prices of these items remain in the stratosphere, and it is for this reason that the store was tagged with the nickname "Needless Markup."

Here's a classic example. About a year ago Marie Lang, sister of yours truly, was searching for a leather shoulder bag. She found a medium brown, designer bag she liked for $1,200 at Neiman Marcus. However, being a discerning/critical comparison shopper, Marie of course took a few days to scout the competition.

The result? She found a comparable shoulder bag at Bloomingdale's for $595. Had she been willing to take a slightly smaller bag, she could have secured one for $395.

TJX Companies (NYSE: TJX) is the largest, family / off-price apparel and home fashion retailer in the United States, boasting seven retail concepts.

Readers of this space know that, given the uncertainties regarding U.S. economic growth, household formation, and job creation, the retail sector is to be avoided. Still, there are exceptions, and with the aforementioned in mind, TJX Companies is worth a review.

In general, analysts expect F2009 revenue to increase 5-7%, including a 3% same store sales increase. The flagship Marmaxx Group (operator of the T.J. Maxx and Marshalls stores) should lead the way, with better brands and increased productivity. A solid performance is also expected from the HomeGoods retail chain.

Further, operating margins are expected to improve, due to increased higher-mark-up sales, diligent control of expenses, and the company's 2500-store buying power advantage. TJX's TJ Maxx and Marshalls stores have become a destination of choice for value-oriented consumers seeking 20-40% price reductions on brand-name apparel. Further, those two chains may benefit in 2008 as certain shoppers, stung by decreased disposable income due to rising energy costs, seek to lower their clothing budget. The Reuters F2009/F2010 EPS consensus estimates for TJX are $2.22/$2.44.

The risks? TJX remains vulnerable to sudden changes in consumer apparel preferences.

The First Call mean rating for TJX is: Buy. [19 firms.] Mean 2008 target: $36. [high: $38, low: $33.]

Stock Analysis: TJX Companies is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from TJX's shares. Sell / Stop Loss if you were to purchase shares in this company: $23.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

With the U.S. economy growing at an anemic rate (if it isn't already in a recession), investors should, in general, avoid the retail sector.

Still, there are those isolated companies, which, via either niche or operational execution, qualify as an exception, and with the above in mind Target is worth a review.

Target Corporation (NYSE: TGT) should post adequate FY 2009 same store sales growth, aided by refinements to its electronics, apparel, and home furnishings offerings, with a continued focus on value.

Readers of this space know that one argument forwarded here is to avoid retail stocks during sluggish economic times, but there are exceptions, and American Eagle Outfitters is one.

American Eagle Outfitters (NYSE: AEO) is one of the largest specialty retailers, targeting teen/young adults, and offering all-American casual apparel, accessories and footwear.

Analysts like the fact that American Eagle has re-focused on its "bread and butter" market: the 15-25 year-old group, and eliminated sideline-demographic categories. The above should drive impressive 12-15% FY 2009 sales growth, accelerating from 10-12% sales growth in FY 2008.

Analysts also like AEO's improved merchandise flows, and regional assortments: look for sales to really impress in AEO's sunbelt stores in the quarters ahead. The Reuters FY 2008/FY 2009 EPS consensus estimates for AEO are $1.81 to $1.98.

The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth evaluating is Urban Outfitters.

Urban Outfitters, Inc. (Nasdaq: URBN) operates more than 120 specialty retail stores under the Urban Outfitters, Anthropologie, and Free People brands, and also offers clothes via a wholesale division under the Free People label.

Analysts like the fact that URBN carries in-demand, self-expressive merchandise, with differentiated retail brands. Most analysts believe the company has achieved a retail gold star: a unique brand position in the ages 18-24 customer category. Moreover, a relatively high 50/50 private label/nation brand inventory lowers inventory risk.

Sales increased an impressive 23% in FY 2008, with analysts seeing a 20-25% rise in FY 2009. Operating costs are reasonable. The Reuters FY 2008/FY 2009 EPS consensus estimates for URBN are $0.90 to $1.15.

MOST NOTEWORTHY: The U.S. retail sector and Occam Networks were today's noteworthy upgrades:

• Bernstein upgraded the U.S. retail sector to Overweight from Market Weight on valuation, as they believe shares now reflect any likely deterioration in earnings growth following the recent sell-off and that further downside is limited even in the event of a recession. In conjunction with the sector upgrade, Bernstein upgraded Lowe's (NYSE: LOW), Home Depot (NYSE: HD), Bed Bath & Beyond (NASDAQ: BBBY), Williams-Sonoma (NYSE: WSM), Kohl's (NYSE: KSS) and Macy's (NYSE: M) to Outperform from Market Perform.
• Merriman upgraded shares of Occam Networks (NASDAQ: OCNW) to Buy from Neutral on valuation and the company's contract win with Fairpoint Communications (NYSE: FRP). They believe shares could trade back toward the 1x revenue level, or $5-7 per share.

OTHER UPGRADES:

• RBC upgraded Suncor (NYSE: SU) to Outperform from Sector Perform.
• TD Newcrest raised Provident Energy (NYSE: PVX) to Buy from Hold.
• JP Morgan upgraded Netflix (NASDAQ: NFLX) to Neutral from Underweight and NYMEX (NYSE: NMX) to Overweight from Neutral.

Retail sales declined 0.4% in December 2007 -- worse than expected -- as sales of most durable goods fell, the U.S. Commerce Department announced Tuesday in a report that raised concerns that the U.S economy has entered a recession.

Economists had expected December 2007 retail sales to decline 0.1%. Further, retail sales rose 4.2% in 2007, the smallest increase in five years.

Excluding autos, retail sales fell 0.4% in December, and declined 0.2% while excluding both autos and gasoline sales, the Commerce Department said.

Recession evidence piling up

Economist David H. Wang told BloggingStocks on Tuesday that the evidence indicating that the U.S. economy has fallen into a recession is mounting.