The outlook for the holiday season brightened Thursday as many of the nation's retailers reported an improvement in sales in October. Discounters, however, had another month of lackluster results as their customers cut back their spending again.

Many mall-based apparel stores, including Limited Brands (LTD), Abercrombie & Fitch Inc. (ANF) and Gap Inc. (GPS), saw a rebound in spending, helped by cooler weather. Wal-Mart Stores Inc. (WMT), Big Lots Inc. (LOTS) and ShopKo Stores Inc. (SKO) were among the merchants who extended a sluggish streak that began in June.

"There was definitely more broad-based growth across the apparel group. But the low-end consumer continues to be hurt on two fronts — jobs and wage growth and higher energy prices," said Ken Perkins, an analyst at RetailMetrics LLC, a research firm in Cambridge, Mass.

"This is a little more encouraging as we head into the holiday season, though it is not a harbinger for a stellar shopping season."

John Morris, senior retail analyst at Harris Nesbitt, noted that "there was pent-up demand for apparel coming at a time when weather was more seasonable", but he warned that the question remains whether that can be sustained during the holiday season.

"The average consumer seems to be pinched," he said.

Even in more secure economic times, it's hard to tell from October sales how the holiday season will fare — whether consumers will shop enthusiastically from the start or put off their buying until late December and force retailers to slash their prices. With the current uncertainty about jobs and energy bills, many storeowners are uneasy about the holidays, especially after the Conference Board (search) reported last week that consumer confidence fell to a seven-month low in October, marking its third consecutive monthly decline.

It's clear shoppers will be looking for value. One of the retailers that did well last month was Target Corp. (TGT), considered an upscale discounter. Target reported a 6 percent gain in sales from stores open at least a year, known as same-store sales. Analysts surveyed by Thomson First Call had expected a 5.6 percent. Total sales were up 12.6 percent.

The International Council of Shopping Centers (search)-UBS sales tally of 71 retailers rose 4.0 percent in October, reaching the high end of expectations. That was the best performance since May, when retailers recorded a 5.7 percent gain, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers. In September, the tally rose 2.4 percent; it is based on same-store sales, which are considered the best indicator of a retailer's performance.

Niemira predicts same-store sales increases of 3 to 4 percent for the holiday period. That compares with a 4 percent increase in 2003.

The National Retail Federation (search) projects total retail sales, which exclude restaurant and auto sales, will increase 4.5 percent for the November-December period, below the 5.1 percent gain of a year earlier.

The good news is that stores seem to be in good shape when it comes to inventories — estimated to be up 5 percent compared to a year ago. That will enable merchants to generate more merchandise sales than a year ago, and depend less on gift card sales; most gift cards are redeemed and therefore recorded in January, according to Niemira.

In other economic news, initial claims for unemployment benefits plunged last week by a seasonally adjusted 19,000 to 332,000, the Labor Department (news - web sites) said. A portion of the decline reflected fewer hurricane-related claims in Florida, but even so, the better-than-expected figures offered encouragement that the job recovery may be gaining momentum.

But job and other economic worries still weigh heavily on the lower-end consumer.

Wal-Mart recorded a 2.8 percent increase in same-store sales. Analysts expected a 3 percent gain. Total sales were up 10.4 percent.

Despite disappointing sales in October, an improved gross margin and a better tax rate will result in Wal-Mart's reporting profits for the third quarter at the high end of its projected range.

ShopKo recorded a 3.1 percent decline in same-store sales. Analysts expected a 1 percent gain at Shopko; its total sales fell 2.9 percent.

Big Lots Inc. reported sales were unchanged from the year-ago period, a bit better than the 1 percent decline that analysts had expected. Still, Michael J. Potter, chairman and chief executive officer, said in a statement that its customer continues to be "challenged in this difficult economic climate."

"As we enter the fourth quarter, we expect customer traffic will remain challenging as our core customer struggles with high prices for gas and other commodities, employment uncertainty, and the likelihood of higher home heating costs," said Potter. "Based on recent trends, there does not appear to be an external catalyst for increased traffic in the short-term."

But plenty of other mall-based stores did well.

Limited reported a robust 14 percent increase in same-store sales in October, though it was slightly below Wall Street's estimate of 14.9 percent. Total sales rose 13.8 percent.

Gap had a 3 percent increase in same-store sales in October, better than the 1.7 percent increase Wall Street expected. Total sales were up 5 percent.

Abercrombie & Fitch posted an 11 percent increase in same-store sales, surpassing the 2.3 percent increase that Wall Street estimated. Total sales were up 28 percent.

Within department stores, Sears, Roebuck and Co. (S), helped by strong sales of home appliances, reported a 1.9 percent same-store sales increase in its domestic business in October. That was better than the 0.5 percent decline Wall Street expected. Total sales were up 0.1 percent.

J.C. Penney Co. Inc. (JCP) had a 2.1 percent gain in sales at its department store business, slightly better than the 2.2 percent forecast. Total sales were up 2.3 percent.

Federated Department Stores Inc. (FD) reported a 4 percent increase in same-store sales, surpassing the 2.6 percent analysts expected, as it enjoyed a post-hurricane sales rebound in Florida. Total sales rose 3.8 percent.

But the company, whose stores include Macy's and Bloomingdale's, warned that same-store sales in November would be up no more than 2 percent, and that it expects an increase of 1 percent to 3 percent in December.

High-end stores again posted robust gains.

Neiman Marcus Group Inc., which operates Bergdorf Goodman and Neiman Marcus stores, had a 13.6 percent gain in same-store sales in October, surpassing the 8 percent Wall Street expected. Total sales gained 13.7 percent.

Saks Inc. had a 4.4 percent gain in same-store sales in October, better than the 2.8 percent increase that Wall Street anticipated. Total sales were up 5.5 percent.

On Monday, May Department Stores Inc. reported a 2.2 percent decline, steeper than the 0.3 percent forecast. Total sales rose 22.9 percent.