Analyst Upgrades

• Chesapeake (CHK) to buy from hold at Canaccord.
• Biogen (BIIB) and Regeneron (REGN) to outperform from sector perform at RBC Capital.
• Caribou Coffee (CBOU) to outperform from neutral and Encore Energy (ENP) to neutral from underperform at RW Baird.
• Fluor (FLR) to market perform from underperform at BMO Capital.
• Hornbeck Offshore (HOS) to conviction buy from neutral at Goldman.
• Saks (SKS) and Zale (ZLC) to neutral from underperform at BofA/Merrill.

On Thursday, Dillard's (DDS) announced that it plans to form a wholly-owned real estate investment trust. The company will transfer some of its properties to the REIT and then lease back the properties from the entity. The company said that the move may enhance its ability to access debt or preferred stock and improve its liquidity.

The market is currently pricing REITs at rich valuations, and the transaction will allow Dillard's to better monetize its significant real-estate assets. By transferring these holdings into a publicly traded REIT, Dillard's should be able to unlock additional shareholder value. According to Craig Johnson, an analyst at Customer Growth Partners, "the sum of the parts can be greater than the sum of the whole."

Analyst Upgrades

• HSBC upgraded Massey Energy (MEE) to overweight from neutral based on improved 2011 pricing power given industry supply-side discipline. Despite the upgrade, the firm cuts its price target to $40 from $54.
• Needham upgraded Blue Coat Systems (BCSI) to buy from hold following yesterday's announcement that Michael J. Borman has been named the new CEO. The firm has a $27 price target on the stock.
• Citigroup upgraded Teekay Offshore Partners (TOO) to buy from hold after the company announced shuttle tanker contracts to reflect improved operating performance. The firm raised its target for shares to $26 from $15.
• Prosperity Bancshares (PRSP) was upgraded to equal weight from underweight at Morgan Stanley.
• Ceradyne (CRDN) was upgraded to buy from hold at Benchmark Co.
• CTC Media (CTCM) was upgraded to buy from hold at Deutsche Bank.

With reduced national income due to unemployment, reduced spending power due to tightened credit, reduced wealth due to falling home and stock market values and reduced confidence due to all of the above, we are seeing consumers take on new attitudes toward spending.

This "New Frugal" will not be a fad that passes quickly. U.S. consumers will continue to keep their purse strings tightened.

I love my country: the chaos, the hurly-burly of democracy, the hard work of quiet people and the great, big heart as shown by our private donations to Haiti at a time of near 20% unemployment and underemployment. We forgive wayward politicians and athletes, let our children make more decisions than virtually any people on Earth and we stand for something -- a true city on a hill. But right now, that city is in political chaos ... and pretty broke.

Although, I don't like to say it, it is time to short the United States.

Retailers appear to have been rescued at the last minute, according to data from the International Council of Shopping Centers. Shoppers looking for deals the week before Christmas -- and making up for the day lost to stormy weather on the East Coast -- spent aggressively, sparing the retail sector a dismal 2008-like performance.

The healthy conclusion to the holiday season led to a positive change from November and made December one of only three months (including September and October) in which retail sales increased year-over-year.

The first estimates for the holiday shopping season have come in. MasterCard (MA) Advisors unit SpendingPulse, which tracks retail spending, puts the result at a year-over-year increase of 3.6%. This includes all form of payment and does not factor in gas and auto sales. The increase comes relative to the 2008 holiday season, which was the worst season in decades for retailers thanks to the global financial crisis.

Says Kamalesh Rao, director of economic research at SpendingPulse, "Last year the economy and consumer spending were in free fall. This year we're talking about an environment that has stabilized, that has seen a leveling off." But, that doesn't mean it's turned the corner yet. Holiday spending isn't enough to cure what ails us.

The holidays have ended, and the real sales have begun. Those choosing to sacrifice sentimentality for savings found retailers only too willing to help, as prices were slashed in the wake of the Christmas rush. Recipients of gift cards stand to see their purchasing power extended, as well, now that redemption time has arrived, and retailers are looking to squeeze in any extra sales they can to pump up their top lines before the books close on the fiscal year, which, for many, comes at the end of January.

Toys "R" Us has offered a deal on Nintendo (NTDOY) Wii games, with the second coming at half price, and Target (TGT) is nearly halving the price of wine glasses and dropping the tag on an argyle women's sweater by nearly a third. Walmart (WMT), which kicked off its cuts at the end of September, is throwing a $50 gift card on top of any Microsoft (MSFT) Xbox 360 buy.

Sluggish retail sales in November didn't stop retailers from adding bodies. A report by outplacement consulting company Challenger, Gray & Christmas, reavealed to BloggingStocks, shows that retail sector payrolls grew to 321,300 in November, an improvement from the previous month's 233,700. This follows 54,200 retail hires in October, bringing the total number of seasonal retail employees up to 375,500. Already, that comes close to the 384,300 hired from October through December in 2008. The analysis is based on data supplied by the Department of Labor.

High expectations for the holiday season likely contributed to the up-tick in hiring. The estimated 0.5% growth from Black Friday 2008 to Black Friday 2009 was a disappointment, and November sales were off 0.3%, surprising analysts, who expected the trend to go in the other direction. Costco (COST) and Limited Brands (LTD) came out ahead, but most retailers, including Target (TGT) and Macy's (M) struggled. Saks (SKS) is also suffering from an anemic luxury goods market.

Two months of momentum and Black Friday weren't enough to make November a winner for retailers. The holiday shopping season kickoff was up only 0.5% year-over-year, and the month as a whole saw retail sales fall 0.3% year-over-year. As if the drop weren't bad enough, it's a decline on top of last year's November retail freefall, which means we went from bad to worse.

Meanwhile, analysts had expected a strong increase. U.S. government data on retail sales isn't due to be reported until December 11, 2009, and it's expected to be a better indicator of the sector's performance. The data released Thursday doesn't include sales by Wal-Mart (WMT).

Here are some highlights from this past week's earnings coverage on BloggingStocks:

• ADC Telecommunications Inc. (ADCT) posted a surprise net loss for Q4 and predicted a loss in Q1.
• BJ's Wholesale Club Inc. (BJ) shares fell after Q3 earnings met expectations and offered guidance for FY.
• Dell Inc. (DELL) posted lower-than-expected Q3 earnings, prompting a sell-off of shares.
• Foot Locker Inc. (FL) said Q3 earnings slumped more than analysts' forecast, sending shares lower.
• Gap Inc. (GPS) reported growth of EPS and revenue in Q3 and announced a share buyback program.

Tuesday, TJX Companies Inc. (TJX) reported that its profit soared in the third quarter, and fellow retailers Dillard's Inc. (DDS) and Saks Inc. (SKS) said they swung to year-over-year profits in the same period.

TJX posted earnings of $347.8 million, or 81 cents per share, compared with $235.8 million, or 54 cents, in the year-ago period. Analysts had expected TJX to earn 80 cents a share. Sales rose 10% to $5.24 billion, while same-store sales increased 7%.

Here are some highlights from last week's earnings coverage from BloggingStocks:

• Aeropostale Inc. (NYSE: ARO) strong Q2 results beat expectations due to rising same-store sales.
• Agilent Technologies Inc. (NYSE: A) Q3 earnings topped low expectations and revenue declined.
• Analog Devices Inc. (NYSE: ADI) posted better-than-expected Q3 results but shares fell on weaker margins.
• Baidu Inc. (NASDAQ: BIDU) CEO said its new advertising efforts will boost sales over the long run.
• Barnes & Noble Inc. (NYSE: BKS) had a better-than-expected Q2 profit but same-store sales fell.
• BJ's Wholesale Club Inc. (NYSE: BJ) reported solid Q2 numbers and raised its full-year guidance.