Retail Reports Hold Up

Retailers' first-quarter earnings reports over the past two weeks were supposed to prove once and for all that the consumer is in trouble.

The consumer, however, never got the memo.

The retail earnings reports proved that customers will continue to patronize the shops that excite them. But stores that miss on merchandise, mood or employee morale will suffer significantly.

One of the best examples of a solidly performing company keeping customers excited is Target TGT. There wasn't much to complain about in the company's report, even though I looked pretty hard.

Target boosted margins and reported a robust 4.3% growth in same-store sales, despite a 6.1% drop in comps in April. Target, along with Costco COST, appears to have become America's favorite place to shop for bargains.

Meanwhile, mid-tier department-store chains J.C. PenneyJCP and Kohl'sKSS blew past expectations, not giving much weight to arguments that Average Joe is feeling pinched by rising gas prices and the housing slump.

Wealthy Joe is still spending as well. Luxury retailer Saks SKS, with its 14.4% rise in same-store sales, is clearly resonating with customers, though its margins were a disappointment. Fellow high-end seller Nordstrom JWN also has shown no sign of letting up.

Retailers' true problems lie in inventory misses and a lack of focus on its customer, as exemplified by Wal-MartWMT. The world's biggest retailer posted fair earnings, but the company's strategy going forward left many wondering whether Wal-Mart has lost its focus. An emphasis on electronics and big-screen televisions seems to be adrift in approach to satisfying the needs of its core customers.