When U.S. retail chains report November sales this week, investors will learn whether they have gone far enough to protect profits against a weak start to the holiday shopping season.

Early data on weekend shopping from U.S. Thanksgiving Day on Thursday through Sunday showed a slight increase in retail sales, pressuring shares from Wal-Mart Stores Inc to J.C. Penney and Saks Inc .

To get a clearer picture of how holiday sales are faring, analysts said they are waiting for retailers to release their own sales figures on Wednesday and Thursday.

This November, (same-store) sales are going to be incredibly important to gauge the state of consumer spending, and thus fourth-quarter earnings and stock trajectory, and it's also an important statement about the economic recovery, said Deutsche Bank analyst Bill Dreher.

Last November, same-stores sales fell 7.8 percent, the worst decline since Thomson Reuters began tracking such figures in 2000. Shoppers, panicked by a financial crisis that wiped out retirement accounts and credit limits, slammed shut their wallets. Retailers were forced to slash prices, undermining profits in the year-end fourth quarter.

This year, analysts got more bullish on prospects for November as customer traffic picked up closer to Thanksgiving Day on November 26, according to Jharonne Martis, director of consumer research for Thomson Reuters.

Ahead of Black Friday, the day after Thanksgiving when retailers offer eye-popping deals, November same-store sales were expected to rise 1.8 percent. They are now expected to notch a 2.4 percent gain.

While many large retailers including Costco Wholesale Corp , Target Corp and Kohl's Corp will release sales figures on Thursday, the data will lack results from key holiday retailers -- including Wal-Mart, Best Buy Co Inc and Amazon.com .

SEEKING CLARITY ON THE TOP LINE

Data released over the weekend pointed to a muted sales start for the holidays. ShopperTrak said sales rose 0.5 percent on Black Friday. The National Retail Federation, the trade group for the retail industry, said customer traffic hit record levels, but consumers spent nearly 8 percent less on average on deals like $3 coffeemakers at Target or $10 toys at Walmart.

The traffic surge was welcomed by retailers.

With November starting off slow, the month's sales results have grown increasingly dependent on Black Friday (and Saturday), wrote Credit Suisse analyst Michael Exstein, in a note on Monday. A recovery toward the end of the month is not an unlikely scenario given retailers' aggressive marketing campaigns.

He said November, which marks the start of the fiscal fourth quarter, is an especially important month for department stores. It accounts for the second largest monthly sales volume of the year behind December, he said.

Department stores are being aggressive to lure customers. J.C. Penney opened at 4 a.m. on Black Friday, while Macy's said it would focus on taking market share by offering discounts during the holidays.

Department stores' November same-store sales are expected to fall 2.4 percent versus a 13.4 percent drop last year.

Discount retailers are expected to fare better. Their November same-store sales should rise 4.1 percent compared with last year's drop of 6.8 percent, according to Thomson Reuters data.

Exstein said gas prices rose from $2.55 in October to $2.65 in November, which should benefit sales results at warehouse club operators like Costco, BJ's Wholesale Club Inc , and Wal-Mart's Sam's Club's that operate gasoline stations.

PROFITS INTACT?

Tom Stemberg, managing general partner at Highland Consumer Fund and the founder of Staples said most retailers lose money on their Black Friday specials. But he said many retailers protected profits this year by cutting inventory.

You will not have the tremendous clearance activity that you had last year, he said.

But Brian Tunick, who covers specialty apparel retailers for J.P. Morgan, said some retailers, including Children's Place and Limited Brands Inc , may have sacrificed margins to drive traffic into their stores.

Eric Beder, who covers apparel retailers at Brean Murray, Carret & Co, said the Black Friday weekend might not have been strong enough to save the month.

He said November sales results and a fourth-quarter forecast from American Eagle Outfitters could disappoint. But he expects Aeropostale to give an upbeat forecast for the fourth-quarter when it posts third-quarter results on Wednesday.

I think the profit picture (overall) is going to be much brighter than the sales picture, he said.

(Additional reporting by Bradley Dorfman in Chicago; editing by Carol Bishopric)

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