Oct. 8 (Bloomberg) -- U.S. retailers will need to focus on managing cash and keeping costs under control as consumer spending returns slowly, according to industry executives.

In the last 10 weeks, Lord & Taylor has seen growth in comparable-store sales, Chief Executive Officer Brendan Hoffman said at a retail panel at Bloomberg’s New York offices yesterday evening.

“We’re definitely seeing signs of improvement,” said Hoffman, whose closely held department-store chain has 46 locations in nine states. “It makes us feel far more optimistic about the upcoming holiday season than we were 12 weeks ago.”

While consumers are growing more confident about spending, a recovery won’t be immediate, retail executives and advisers said. U.S. holiday sales for the last two months of the year will probably fall 1 percent to $437.6 billion from the same period in 2008, the National Retail Federation said on Oct. 6. Last year’s decline of 3.4 percent was the first drop since the Washington-based NRF started tracking holiday sales in 1995.

Marc Cooper, head of the retail practice at New York-based investment bank Peter J. Solomon Co., is telling his clients to focus on cash management and brand preservation as weaker players in retail disappear. Solomon’s customers have included clothing retailer Lands’ End Inc. and Dick’s Sporting Goods Inc., the largest publicly traded U.S. athletic store.

‘Live to Fight’

“You’ve got to live to fight another day,” Cooper said. “You live to fight another day because you have the capital to get there and you prosper another day because you haven’t ruined your brand.”

Consumer demand won’t return rapidly, said John Mahoney, chief financial officer of Staples Inc., the world’s largest retailer of office supplies.

“It’s about making sure you have adequate liquidity,” Mahoney said. “We generate a lot of cash and as a result we’re paying back debt now.”

Staples, based in Framingham, Massachusetts, rose 7 cents to $23.18 at 4 p.m. in Nasdaq Stock Market trading. The shares have climbed 29 percent this year.

The CFO said he wouldn’t borrow money to buy back stock. That’s the right idea, said Gilbert Harrison, chairman and chief executive officer of Financo Inc., a New York-based adviser and investment bank specializing in retail.

“Companies should be conserving their cash and keeping money in reserve in case we have some problems,” said Harrison.

While there will be some recovery in retail in the next 12 months, it will take five years or more to get back to the levels of 2005, he said.

Same-Store Sales

In September, U.S. retail sales rose for the first time in more than a year, researcher Retail Metrics Inc. said today. Chains including Aeropostale Inc., Kohl’s Corp. and J.C. Penney Co. reported monthly sales that topped analysts’ estimates and raised profit forecasts as shoppers returned to stores.

The U.S. unemployment rate rose to 9.8 percent in September, the highest since 1983, from 9.7 percent in August, the Labor Department said Oct. 2.

Confidence among U.S. consumers unexpectedly fell in September. The Conference Board’s confidence index dropped to 53.1, from a revised 54.5 in August. Consumer confidence was projected to increase to 57, according to the median estimate in a Bloomberg survey.

New York-based Lord & Taylor was among retailers that cut costs to counter the drop in spending as unemployment rose. The company canceled a $10 million branding campaign overnight, and instead incorporated that message into its advertisements, the CEO said.

Such moves will pull the department-store chain through as the economy improves, Hoffman said.

“We purged so many expenses out of the system that would have taken me decades to probably have done,” Hoffman said. “We have such a lean base right now, and we’ve learned that we can not only survive but really thrive.”

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net.

Last Updated: October 8, 2009 16:13 EDT