NEW YORK (TheStreet) -- Retail earnings have been a success so far, but investors should proceed with caution when looking for investments in the industry.

The S&P 500 Retail Index today reached a new 52-week high after retailers this week reported solid fourth-quarter earnings. The retail index is up nearly 10% so far this year and has advanced almost 20% since its October low.

The increase in the index has coincided with rising consumer confidence resulting from the improving economic environment. While consumers are more confident in their financial positions, it was apparent from the latest round of quarterly reports that they continue to look for bargains when shopping for discretionary items. The other major retail theme seems to be that the luxury consumer remains strong with high-end shoppers out in force and paying full price.

The only two major retailers that missed on earnings were discounters,

Wal-Mart

(WMT) - Get Report

and

Target

(TGT) - Get Report

. While investors punished Wal-Mart's stock price for its weak report, Target's stock actually increased as investors were encouraged by the sales trend the retailer is seeing in February, especially the demand for discretionary merchandise which carries higher margins.

Based on stock performance after the earnings report,

Sears Holdings

(SHLD)

and

Saks

(SKS)

were the big winners this week. The former saw its stock jump 18% on new it plans to sell a number of stores to help shore up its balance sheet. Saks' stock was rewarded for that luxury consumer strength.

Commentary surrounding February sales was upbeat for many of the retailers. Favorable weather throughout the month is certainly contributing to this trend, but there is evidence that the bargain retailers are experiencing strength this month.

TJX Companies

(TJX) - Get Report

, the operator of TJ Maxx stores,

Dollar Tree

(DLTR) - Get Report

and Target all spoke to better than expected sales trends in February.

Despite good fourth-quarter reports and favorable outlooks from retailers, investors should be selective when looking for retail stock investments. With the run the S&P 500 Retailing Index has had, many retailers trading near 52-week highs, and with gasoline prices on the rise (often considered a tax to the consumer), it could be difficult for retailers to continue the recent run.

Here's a summary of the retailers that reported quarterly results this week:

Tuesday, Feb. 21

Home Depot

(HD) - Get Report

EPS Beat/Miss:

Beat by $0.08

Stock Performance Day of Earnings:

0.4%

Drivers of Beat/Miss:

Warm weather in the quarter drove customers to Home Depot stores. This resulted in stronger than expected sales that drove an increase in leverage on the SG&A expense line.

Wal-Mart

EPS Beat/Miss:

Missed by $0.01

Stock Performance Day of Earnings:

-3.9%

Drivers of Beat/Miss:

Sales at Wal-Mart's international business were lighter than what analysts had expected, but the miss was driven by lower than expected profits in the overall business. The Dow component's strategy to lower prices to attract more customers was successful in that traffic at the U.S. stores did increase in the quarter after six quarters of declining traffic, but margins suffered accordingly.

Macy's

(M) - Get Report

EPS Beat/Miss:

Beat by $0.05

Stock Performance Day of Earnings:

1.2%

Drivers of Beat/Miss:

Strategic initiatives related to merchandise assortment at both Macy's and Bloomingdale's department stores helped dive the 5.5% increase in sales during the quarter. A disciplined approach to discounts during the holidays also helped Macy's beat analysts' expectations this quarter. On average customers paid 9% more for products this quarter compared to last year.

Saks

EPS Beat/Miss:

Beat by $0.03

Stock Performance Day of Earnings:

3.3%

Drivers of Beat/Miss:

Saks continues to benefit from a strong luxury consumer. Sales at comparable stores increased an impressive 7.7% in the quarter and online sales increased 20%. That strength coupled with customers that were willing to pay full-prices for merchandise, drove profitability that was much better than expected.

Wednesday, Feb. 22

Dollar Tree

EPS Beat/Miss:

Beat by $0.02

Stock Performance Day of Earnings:

-0.7%

Drivers of Beat/Miss:

Dollar Tree continued to take share from Wal-Mart as customers find its locations more convenient than Wal-Mart stores. Sales were much better than expected, driven almost entirely by increased traffic to the stores. Sales accelerated throughout the quarter and management noted on the conference call that the dollar store was off to a great start in 2012.

TJX Cos.

EPS Beat/Miss:

In-line with Consensus

Stock Performance Day of Earnings:

-0.3%

Drivers of Beat/Miss:

TJX, operator of TJ Maxx and Marshalls stores, reported a solid quarter that benefited from the consumer's desire to shop for bargains. The company also announced a 21% increase in its dividend and authorized the repurchase of an additional $2 billion worth of shares.

Limited Brands

(LTD)

EPS Beat/Miss:

Beat by $0.04

Stock Performance Day of Earnings:

1.2%

Drivers of Beat/Miss:

Limited Brands, operator of Victoria's Secret and Bath & Body Works stores, had a solid quarter. At Victoria's Secret, same-store sales increased 14% in the quarter. At Bath & Body Works, same-store sales increased 6%. February is off to a strong start and the company announced a new $500 million share repurchase program. Guidance provided was below Street estimates, but the company has historically provided conservative guidance at the start of the new year.

Thursday, Feb. 23

Target

EPS Beat/Miss:

Beat by $0.03

Stock Performance Day of Earnings:

2.9%

Drivers of Beat/Miss:

Target, like rival Wal-Mart, cut prices during the holiday shopping season to lure bargain-hunting shoppers in their stores. It was encouraging to hear that discretionary items like apparel saw strength in January and into February. Plans to offer limited edition merchandise from specialty shops should help this trend continue.

Kohl's

(KSS) - Get Report

EPS Beat/Miss:

Beat by $0.01

Stock Performance Day of Earnings:

-7.2%

Drivers of Beat/Miss:

While Kohl's beat earnings on the bottom line, the overall report was weak. The company announced plans to lower prices immediately along with earnings, suggesting they are seeing competitors pick up share. Management noted on the conference call that additional advertising spend in the quarter did not deliver the sales lift they anticipated. Inventories weren't in great shape either, with clearance inventory down double digits, leaving minimal bargains for shoppers.

Sears Holdings

EPS Beat/Miss:

Miss by $0.36

Stock Performance Day of Earnings:

18.7%

Drivers of Beat/Miss:

The fundamentals at Sears Holdings, which operates Sears and Kmart stores, remain very weak but management announced plans to take steps to reduce the company's debt burden, and the stock soared. Management is looking to separate its Sears Hometown and Outlet businesses and certain hardware stores through a rights offering expected to raise $400 million to $500 million.

Friday, Feb. 24

JCPenney

(JCP) - Get Report

EPS Beat/Miss:

Beat by $0.07

Stock Performance Day of Earnings:

-0.4%

Drivers of Beat/Miss:

JCPenney revealed that inventories were down 9.2%, a key focus as new CEO Ron Johnson looks to clear out merchandise. These efforts though led to higher markdowns and weaker than expected gross margins as the company transitioned to its new pricing strategy. Management noted that the new pricing strategy to offer value every day and promote less is resulting in lower same-store sales since the strategy was implemented three weeks ago.

--

Written by Lindsey Bell in

New York.

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Lindsey Bell

.