Retailers Target Corp and Saks Inc posted better-than-expected quarterly results on Tuesday as they clamped down on expenses and inventory to offset falling sales, sending shares higher.

Target and Saks have seen sales fall during the recession as shoppers across the income spectrum avoid splurging, not just on the full-priced designer shoes and apparel found at Saks, but also on the discount designer goods sold at Target.

Instead, consumers appear to favor bargain hunting in the aisles of T.J. Maxx and Marshalls. TJX Cos Inc , which runs the off-priced chains, reported a 4 percent rise in quarterly sales, citing extraordinary increases in customer traffic.

Yet TJX's quarterly profit was only slightly higher than analysts had expected, and its shares fell 4.2 percent in morning trading.

The results came the same day that Home Depot Inc reported a higher-than-expected quarterly profit as cost cuts partly offset weak sales at the home-improvement retailer.

At Target and Saks, cost cuts and a tight control on inventory helped to bolster the quarter -- a trend seen last week when retailers including Macy's Inc and Nordstrom Inc reported quarterly results.

It's still a struggle to grow the top line and drive traffic, said Ken Perkins, president of Retail Metrics Inc. Customer weakness is really what's behind these weak top line numbers.

Target's profit was $594 million, or 79 cents per share, for its second quarter that ended August 1, down from $634 million, or 82 cents per share, a year earlier.

Analysts, on average, had been expecting it to earn 66 cents per share, according to Reuters Estimates.

Its sales fell 2.7 percent to $14.6 billion, while sales at stores open at least a year, a key retail gauge known as same-store sales, fell 6.2 percent.

Saks' net loss widened to $54.5 million, or 39 cents per share, in the fiscal second quarter that ended on August 1, from $32.7 million, or 24 cents per share, a year earlier.

Excluding items, Saks lost 40 cents per share, topping analysts' average forecast for a loss of 52 cents a share, according to Reuters Estimates.

Saks said sales fell 14.5 percent to $561.7 million, with same-store sales down 15.5 percent.

Saks, which sells designer brands such as Marc Jacobs, Versace and Oscar de la Renta, expects same-store sales to fall in a mid-to-high single-digit range in the second half of the year, with the third quarter being weaker than the fourth.

TJX Cos said net profit was $261.6 million, or 61 cents per share, in the second quarter that ended August 1, compared with $200.2 million, or 45 cents per share, a year earlier.

Analysts had forecast 60 cents a share.

TJX buys excess merchandise at below-wholesale prices and sells it at deep discounts -- an appealing prospect for consumers who are spending less on discretionary items such as clothing and home goods in the economic slump.

TJX shares fell 4.2 percent to $33.89, while Saks' shares rose more than 4 percent to $5.60. Target's shares gained 5.7 percent to $43.58.

(Reporting by Nicole Maestri in San Francisco, Jessica Wohl and Brad Dorfman in Chicago and Aarthi Sivaraman in Seattle; Editing by Maureen Bavdek)

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