Given an improving economy and strong earnings in the just-completed quarter, you'd think retailers would be optimistic about the current holiday period. Think again.

Despite reporting bright third-quarter results, few retail companies expressed particular confidence about how they will do in the always crucial fourth quarter, when most retailers receive the bulk of sales -- and profits.

Most economists are quite upbeat, and some retail analysts expect a blowout quarter. Others think it will be much less impressive, and there is particulary concern about chain-store operators.

"I think some of that caution is understandable, since in the recent past any optimism was not a positive thing, because sales have come in below plan," said Michael Niemira, a retail analyst and vice president of Bank of Tokyo-Mitsubishi. "The cautiousness is, to a degree, 'let's not repeat the mistakes of recent years.'"

The main thing that retailers have going for them this year is the last year was so bad, and comparisons will be easy. Last year, retailers

experienced one of the worst holiday seasons in recent memory. Indeed, some observers suspect retailers are sandbagging expectations for the fourth quarter.

"A lot of guys understand the game," said one buy-side analyst, who requested anonymity. "They want to beat expectations, so they keep expectations low."

Russell Jones, president of Decisive Retail Technology, an industry consulting firm, says, "there's no reason not to expect a really strong Christmas season for a large number of retailers," especially compared to last year's weak sales.

Britt Beemer, a retail analyst and chairman of America's Research Group, projects that overall retail sales will grow 4.8% this holiday season, a significant jump over last year. Meanwhile, the National Retail Federation projects retail sales will grow by 5.7% this holiday season.

Consumers started picking up their spending in June, Beemer said. Surveys indicate consumers plan to continue that trend in the holiday season, with the average consumer planning to spend more this year than last, he added.

But some retailers truly may have trouble in the holiday season, even the most optimistic analysts acknowledge. Notably, few companies followed up those strong third-quarter reports with bold predictions about the future. Instead, many declined to predict how the fourth quarter would turn out -- or warned outright that their earnings would likely come in below analysts' expectations, including:

Wal-Mart warned that it hasn't experienced the same strength in consumer spending that analysts and investors have seen. The midpoint of the retail behemoth's earnings guidance for the fourth quarter was a penny below analysts' estimates.

Williams-Sonoma cautioned that it has seen fluctuating sales results in recent weeks and left its fourth-quarter earnings estimates unchanged, citing a "level of uncertainty" in its forecast.

Talbots said it was cautious about the fourth quarter due to inconsistent sales trends in October. The company pointedly did not give fourth-quarter guidance.

Additionally, Dollar Tree Stores , Michaels , Target , Abercrombie & Fitch and Kohl's each warned they might not meet analysts' fourth-quarter earnings targets.

Warning Shots

For some, the warnings and wariness were troubling. With the long-awaited economic recovery at hand, retail stocks have largely outpaced the broader market this year. The S&P Retail Index was up 44.2% year to date through Tuesday, more than double the

S&P 500's

gain. Some individual companies' shares have appreciated more than 100%, leaving them quite vulnerable to bad news. A number of the aforementioned saw their stocks drop sharply after giving cautious fourth-quarter forecasts. Dollar Tree, for example, fell 8% Wednesday after posting

disappointing guidance.

"There's a lot of optimism that's been priced in there, so you've got to deliver," said the buy-side analyst.

Retailers' third-quarter reports benefited from the refinancing boom and tax-rebate checks, which both spurred consumer spending. But those rebate checks are now spent and rising interest rates have slowed the refinancing wave. Meanwhile, a still-difficult labor market is starting to weigh on consumer spending. Retail sales fell in both September and October, following over 1% gains in both July and August.

Part of the dire outlook for many retailers comes from how they finished the quarter. While many posted strong sales in August and September, many of those same companies showed weak or troubling sales reports in October.

Retailers' wariness mirrors the outlook of consumers, noted Kurt Barnard, president of Retail Forecasting, a consulting firm.

"Consumers are cautious," Barnard said. This holiday season, "they won't go on buying binges or spending sprees. The first thing they're looking at is not the product, but the price tag."

Another factor likely to hold down consumer spending is what Richard Hastings, a retail sector analyst and chief economist for credit consulting firm Bernard Sands, dubbed a lagging "wealth deficit." Many Americans have paid down credit card and other debts only through other forms of borrowing, such as taking out cash through refinancing their houses or getting a rebate on buying a car, Hastings said. "The dependence on credit remains too high for my comfort level."

Additionally, consumers are shifting a growing portion of their holiday spending to gift cards, Hastings and other analysts note. While gift cards still represent a sale for retailers, companies aren't able to register those sales until the gift cards are spent by their recipients. Since that often doesn't happen until weeks after the end of the holiday season, the effect is that recognized holiday sales are depressed.

"This is a trend that will continue," Hastings said. "The holiday shopping season, regardless of how many holiday shopping days there are, will never be the spike in sales that it represented in the past."

Even if consumers do come out in full force this holiday season, they are likely to be disappointed by the selection, some analysts say. As was the case last year, there are few "must have" products on the shelves this year. That could make the season tough for toy retailers and apparel chains, both of which depend heavily on holiday sales.

"There's nothing really out there that people are going to fight for, so department stores that are dependent on that are probably hurt the most," added Richard Feinberg, a professor of retail management at Purdue University.

The sum total of all this is that consumers and retailers are likely to engage in another staring contest this year to see who blinks first. Feinberg predicts that sales on this so-called Black Friday, marking the traditional start of the holiday shopping season, will be poor enough that retailers will cut prices soon afterward to draw in customers.