Look for signs of improvement when retailers report February same-store-sales on Thursday, with just about all major categories expected to fare better than in prior months.

Sales by the 35 retailers that Thomson Reuters tracks are expected to drop 1.2%, an improvement over January's 1.8% decline and November's 2.1% drop. Retailers' comparable store sales fell by 0.9% in December. However, given trends over the last few months, more retailers have beaten than missed analysts' expectations. So February's final figure could also end up beating December's result.

Retailers have been saying in recent fourth-quarter conference calls that they are making headway in reducing their inventories. But there are likely to still be margin questions because indications are that in many cases deep discounting continued in February.

But things are not all bad. While many of the projected same-store sales improvements for February are incremental - and still represent drops in year-over-year sales - there may be some stabilization developing.

"Things generally crashed over the last few months, and now we are seeing some signs of improvement," said Jharonne Martis, senior research analyst at Thomson Reuters.

The stabilization may have at least a bit of longevity, Martis said. "If the (federal) government's (economic) stimulus package is implemented, especially the tax rebates, we could see more of an uptick in consumer spending."

But permanency is the big question. The tax rebates given out last year and in 2001 did help spending levels increase somewhat, but the improvement did not last, government reports show.

Right now there are too many dire variables - including a recession, a crumbling financial system and high unemployment - to foster much consumer confidence, which is key to spending.

Consumers are also saving more. The U.S. savings rate climbed from 3.9% in December to 5% in January, its highest level since March 1995.

Of the five major retail categories that Thomson Reuters tracks, three - department stores, apparel retailers and specialty retailers that focus on teens - are expected to do better in February than January.

Discounters are awfully close, projected to see comparable store growth of 0.8% in February compared to 0.9% in January.

Wal-Mart Stores Inc. (WMT) is a standout, expected to see three successive months of improvement, from growth of 1.7% in December to 2.1% in January and 2.4% in February.

But Target Corp. (TGT) can't catch an uptrend, with February same-store sales expected to drop 4.8% after a 3.3% decline in December and a 4.1% fall in November.

Several department stores - one of the hardest-hit retail groups - are at least expected to show some improvement, although their sales are still down. Kohl's Corp. (KSS) is projected to see a 4.4% drop in February after a 13.4% decline the prior month.

J.C. Penney Co. (JCP) is projected to report a 12.9% decline after same-store sales fell 16.4% in January.

Among teen retailers, American Eagle Outfitters Inc. (AEO) and Aeropostale Inc. (ARO) may both show the benefit of "aggressive and innovative promotional tactics," said Chandi Neubauer, retail analyst at Majestic Research.

Robert Samuels, retail analyst at Oppenheimer Equity Research, said he "would not be surprised to see some names beat expectations."

But there remains a cost in many cases. Retailers "are offering steep discounts in order to entice customers to buy, which will continue to hamper margins," Samuels said.

-By Karen Talley, Dow Jones Newswires; 201-938-5106; karen.talley@dowjones.com