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Excuses, excuses: Proof that consumers are spending

So much for the idea that consumers aren't spending.

Tuesday's round of earnings reports from industry leaders Home Depot and TJX, along with a fifth straight quarter of domestic same-store sales growth at Wal-Mart, dispelled some market fears that consumers are keeping their wallets clamped shut as the holidays quickly approach.

The results — which sent shares of each of these three retailers higher in early trading — solidified the belief that shoppers aren't simply saying no to retail. Instead, they're being selective about where they spend their money, with home improvement and value stores at the top of their wish lists.

Underscoring that point, the spate of reports stood in stark contrast to disappointing results from Urban Outfitters and Dillard's on Monday, as well as weak performance from the department store set last week. Those results had sent retail stocks in a tailspin, with Nordstrom, Macy's and Urban Outfitters all suffering steep declines.

Despite Tuesday's more optimistic results, retail stocks continued to be under pressure, falling into negative territory before reversing their losses.

Home Depot employee, Arlene Carbonell, (R) helps Anna Vasquez as she shops in the paint department at the store in Miami, Florida.
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Home Depot employee, Arlene Carbonell, (R) helps Anna Vasquez as she shops in the paint department at the store in Miami, Florida.

Home Depot on Wednesday posted a 5.1 percent same-store sales increase during the third quarter, helped by a boost in transactions from do-it-yourself shoppers. That represented an acceleration from the previous period's 4.2 percent growth.

As home values increase across the U.S., consumers are putting more of their budgets toward upgrading and decorating their houses, giving an inherent boost to retailers like Home Depot and Lowe's.

According to Craig Johnson, president of Customer Growth Partners, this momentum is expected to continue into the holiday period, with sales from the home improvement sector expected to increase 4.8 percent. Likewise, CGP expects the home furnishings category will also outpace overall sales growth, gaining 4.6 percent during the holiday season.

"In our view, Home Depot's results should allay some of the fear over the strength of the home improvement spending and the consumer's willingness to spend," Citi analyst Kate McShane told investors on Tuesday.

Playing into another consumer trend, TJX, the off-price parent company of TJ Maxx and Marshalls, likewise posted another quarter of mid-single digit comparable sales growth. CEO Carol Meyrowitz cited strength at all of its divisions and across the apparel, accessories and home categories, as shoppers continue to seek name-brand goods at a value.

In the apparel category alone, off-price retailers have been gaining about a half-point in market share each year, as they steal business from full-line department stores, according to Customer Growth Partners.

"We believe the compelling merchandise offering of national brands, the diverse product assortment, and everyday value-pricing continues to drive shopper traffic into the TJX concepts," Guggenheim Securities analyst Howard Tubin told investors.

Even Wal-Mart, whose shares have taken a beating following its October investor meeting, managed to beat earnings estimates during the third quarter, helped by its fifth consecutive quarter of same-store sales growth in the United States, and its fourth-straight quarter of traffic growth.

Similar to TJX, Wal-Mart's revenue gains were broad-based, with growth at both its supercenter and smaller-format stores. It also posted gains in grocery, health & wellness, apparel and home, with only general merchandise dipping slightly lower. The performance indicates that several of the discounter's initiatives are starting to pay off, as it works to improve its apparel and food offerings, in particular.

U.S. chief Greg Foran said Wal-Mart posted its best top-line results of the year in the food category.

"Our customers told us they're happy with the improvements we're making in their shopping experience," Foran said.

Despite Tuesday's rosier round of reports, which were weighed down slightly by a top- and bottom-line miss from Dick's Sporting Goods, the retail space continues to be plagued by consumers who prefer to spend on big-ticket items or travel.

Urban Outfitters on Monday became the latest victim of this spending shift when it posted its weakest two-year same-store sales performance in eight years, according to Cantor Fitzgerald. That report capped off a disappointing round of results from department stores including Nordstrom and Macy's, with J.C. Penney emerging as the group's surprise standout heading into the holiday season.

The results sent retail stocks into a tailspin, with Steve Odland, president and CEO of the Committee for Economic Development telling CNBC that bloated inventories and weak sales are setting up the sector for a "bloodbath" in the fourth quarter. Retailers have blamed everything from warm weather to "product acceptance challenges," for their shortfalls.

While there may be some truth to the fact that warm weather has pushed back some purchases of cold-weather gear, Tuesday's results prove that shoppers are willing to spend on items they deem worthy. It's worth noting, however, that Wal-Mart, Home Depot and TJX — the latter of which can quickly flex its departments to better correspond with demand — are less sensitive to weather swings than some of its competitors.

While Tuesday's results allayed some of the market's fears, the industry is nonetheless expected to post muted growth during the holiday period, with most forecasts calling for low- to mid-single digit growth. The National Retail Federation has predicted that sales will increase 3.7 percent during November and December, which would mark a deceleration from last year's 4.1 percent growth.