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Good luck assessing the health of the retail sector heading into the critical holiday shopping season. The signals couldn't be more mixed.

On Wednesday, two more big U.S. chain stores – J.C. Penney Co. Inc. and Staples Inc. – joined the growing list of retailers disappointing the markets with weak results. The day before, Sears Canada Inc. reported a deep quarterly loss. Last week, Canadian grocery chains Loblaw Cos. Ltd. and Metro Inc. posted weaker-than-expected numbers. Wal-Mart Stores Inc. reported slumping same-store sales, and warned that it expects flat sales for the holiday season.

FactSet, a U.S. financial-market research firm, recently reported that the outlook for same-store sales growth among U.S. retailers have been falling steadily since the summer. Analysts now forecast year-over-year growth of a modest 2.4 per cent for the quarter ending Jan. 31, 2014 – which would be the slowest quarterly pace in nearly two years. Sales growth forecasts for the quarter for a wide range of retailers – from Wal-Mart Stores Inc. to Target Corp. to Abercrombie & Fitch Co. to Coach Inc. – have fallen sharply in the past few months.

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But at the same time, U.S. retail sales numbers are picking up. The U.S. Commerce Department reported Wednesday that October's sales were up 0.4 per cent from September, and up 3.9 per cent from a year earlier – despite the U.S. government shutdown that was supposed to have made consumers more cautious with their money. The International Council of Shopping Centers, which tracks retail trends and expectations, reported that retail momentum has continued to build on the strong October result, with solid sales growth in the first two weeks of November.

But now comes crunch time, with next week's post-Thanksgiving "Black Friday" sale day marking the unofficial kick-off of the holiday shopping frenzy. Here again, the outlook is clouded.

The ICSC has forecast holiday-season sales growth of 3.4 per cent – about in line with the median over the past 10 years, but nevertheless still considerably brighter than the retreating fourth-quarter outlooks for retailers would suggest. In Canada, consultancy Deloitte LLP recently forecast holiday sales growth of 2 to 2.5 per cent, well above last year's 1.4 per cent.

Yet the retailers themselves have been mixed on their expectations. J.C. Penney has predicted a big bounce-back in its holiday sales after a miserable season last year. The likes of Macy's Inc. and Target have also issued optimistic holiday-season outlooks. But Wal-Mart and others have cautioned that with holiday retail competition heating up, starting with next week's massive post-Thanksgiving "Black Friday" sales, deep discounting threatens to take a substantial bite out of sales and profit numbers over the holidays. Canada's own raging war in the retail sector, thanks to the growth of U.S. competitors who have set up shop in Canada, also threatens to trigger deep holiday discounting in a quest to lure customers.

For everyone from stock investors to central bankers, some clarity on just where retail is headed would be most welcome. That might start to come at the end of next week, when the Black Friday results begin to roll in. Until then, the retail sector either warrants cautious optimism, or optimistic caution.

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