Would someone please tell

Kohl's

(KSS) - Get Report

and

Talbots

(TLB)

that the U.S. economy is teetering on the edge of recession?

The retailers have continued to show robust growth, topping earnings estimates and posting impressive sales gains as they push ambitious expansion plans. Yet neither is the sort of retailer traditionally considered recession-proof, such as dollar-store chains, warehouse-type discounters such as

Costco

(COST) - Get Report

and drug-store operators.

The upshot is that investors continue to be willing to pay for performance and the prospect of growth, particularly as the meltdown in tech stocks and the recent weakness in blue-chips have set markets on edge. Talbots shares lately were down 80 cents to $43.80, while Kohl's was up $2.08 to $63.69.

Producing

Up With Preppies
Boiled wool sells, evidently

Wednesday morning, Hingham, Mass.-based Talbots reported solid

fourth-quarter earnings, and in the conference call nary a mention was made of the slowing economy. The company, a specialty women's apparel retailer that offers classic fashions at prices just below designer

Ralph Lauren's

(RL) - Get Report

threads, said quarterly profits came in at 51 cents a share, more than double a year ago and a penny above the

First Call/Thomson Financial

consensus estimate. Talbots saw double-digit growth across its three channels -- catalog, Web site and bricks-and-mortar shops -- a feat achieved without the deep discounting that other retailers, such as the

Gap

(GPS) - Get Report

and virtually every department store, were forced to resort to in the wake of a dismal holiday shopping season.

A day earlier, Kohl's reported its own

stellar fourth-quarter earnings after the close of trading. Kohl's, a discount department store chain with a slightly upscale bent that is based in Menomonee Falls, Wis., topped Wall Street estimates by 2 cents when it reported earnings of 52 cents a share. Wednesday, analysts rushed out glowing reports on Kohl's, with some raising their earnings targets.

Mark Picard, an analyst at

Lazard Freres

, raised his earnings target for 2001 to $1.36 from $1.33. He also predicted that the first quarter would be the fifth in a row for the company to show more than 30% earnings-per-share growth. "We believe that Kohl's 'best of breed' business model and consistent solid merchandise execution will enable the company to maintain its impressive earnings growth in the quarter," he wrote. Picard has an outperform rating on the stock, and his firm hasn't done underwriting for Kohl's.

Retailers, although they have taken their hits along with tech stocks in recent days, have been among the top performers in recent months. The

S&P Retail Index

is up around 20% since mid-October. And this, despite a slowdown in consumer spending and a glut of stores in America, with the Gap being the biggest offender in that department. Much of the optimism for the sector centers on historical data that show retail stocks to be top performers in the wake of

Federal Reserve

interest-rate cuts. The Fed has slashed rates twice since early January and is widely expected to continue doing so in an attempt to rescue the economy from impending recession.

Risky?

Backing Off
Kohl's up strongly but off highs

Both Kohl's and Talbots made aggressive statements about the future. Kohl's outlined plans to open 60 new stores in 2001 and 70 in 2002, equating to annual square footage growth of close to 20%. The result will be Kohl's emergence as a national chain; until now, it has been mainly concentrated in the Midwest, with recent forays into the Northeast.

Talbots, meanwhile, said it plans to enter the men's market, something the company studied five years ago, but halted in 1997 to focus on its core business. "We now feel we are in a position to develop major new concepts," Arnold Zetcher, chairman and chief executive, told investors on a conference call.

Talbots will start researching a men's line this spring, but the first items won't make it to shelves until fall of 2002 at the earliest, the company said.

"I think it's a great idea," says Harry Ikenson, an analyst at

J.P. Morgan Chase

. "To have classic merchandise for men with updated styling would be terrific." (Ikenson has a buy rating on Talbots and his firm has no banking relationship with the retailer.)

"I can't think of a men's shop that makes it as easy to shop as Talbots does for women," Ikenson says.

Still, there are risks. The men's apparel business is typically much tougher than women's, says Kurt Barnard, a retail consultant and publisher of

Barnard's Retail Trend Report

. "It's a very risky situation," he says. "You would have to make a name for yourselves in men's, and that is very difficult. Men might say, 'Hey, that's my wife's or girlfriend's store. I don't want to shop there.'"