Discount retailer Target Corp and warehouse club operator BJ's Wholesale Club Inc posted higher-than-expected quarterly earnings as consumers began to spend on more than just necessities.

Target cited sales of more profitable items like apparel, while BJ's saw a return of consumers buying in bulk. Target shares were down 0.6 percent, while BJ's gained 4.5 percent.

The results at Target also highlighted a split in U.S. consumer spending. Sales at Target stores open at least a year rose 2.8 percent, while much larger rival Wal-Mart Stores Inc on Tuesday posted a worse-than-expected drop in same-store sales at its U.S. discount stores.

The core Wal-Mart customer is skittish about high unemployment and rising gasoline prices, analysts said, while consumers with even slightly more economic stability are shifting back to department stores and retailers like Target as the recession recedes.

But the economic recovery is still tepid, and Target CEO Gregg Steinhafel repeated his warning that there will be good months and bad months during the recovery.

Target's customers are still not trading to higher-priced items within categories, but they are willing to buy additional items, Kathryn Tesija, executive vice president for merchandising, said during a conference call with analysts.

It's more about guests putting an extra discretionary item in the basket, she said of the higher sales.

Target expects same-store sales in the second quarter and the fall shopping season to rise 2 percent to 4 percent, though May same-store sales so far are about flat, partly due to bad weather, company executives said.

Target's sales are coming back stronger in discretionary departments, and that bodes well for back-to-school and as we head into the holidays, Wall Street Strategies analyst Brian Sozzi said.

CREDIT CARDS AND CANDY

BJ's saw strong sales in apparel in the first quarter, though not in more expensive items like televisions, which actually had a tough comparison with year-ago numbers.

But improved sales of basic household items point to economic recovery, since customers buying in bulk need to pay more up front, Sozzi said.

You have to have more confidence in your economic standing to tie up the pantry with 20 bottles of shampoo, he said.

Target's profit rose to $671 million, or 90 cents per share, in the first quarter ended May 1, from $522 million, or 69 cents a share, a year earlier.

Analysts on average had forecast 86 cents a share, according to Thomson Reuters I/B/E/S.

Target said its credit card business did much better than expected due to a sharp reduction in bad debt expense compared with a year earlier. Profit in the segment jumped to $111 million from $39 million.

Target said analysts' average forecast for second-quarter earnings of 91 cents a share and full-year earnings of $3.81 a share were within the range of the company's own expectations.

At BJ's, higher sales of candy, cigarettes, housewares and small appliances lifted results. The company also saw a 4 percent increase in customer traffic, excluding gasoline sales.

BJ's said profit rose to $26.1 million, or 49 cents a share, in the first quarter ended May 1, from $24.3 million, or 45 cents a share, a year earlier.

Analysts on average were expecting 43 cents a share.

BJ's raised its full-year earnings forecast to a range of $2.58 to $2.68 a share, up from a previous view of $2.54 to $2.64.

(Reporting by Brad Dorfman; Editing by Lisa Von Ahn and John Wallace)

Retail Target