By Brad Dorfman

CHICAGO, May 13 (Reuters) - Wal-Mart Stores Inc (WMT.N) is expected to show it is losing shoppers to other retailers in an improving economy when it reports first-quarter earnings next week.

Meanwhile, rival Target Corp (TGT.N) has been gaining at the expense of the world's largest retailer. Target also reports earnings next week and has already said that sales at stores open at least a year rose 2.8 percent in the quarter ended May 1.

Wal-Mart does not report monthly sales, but analysts expect U.S. same-store sales to be flat or down. The retailer in February forecast those sales at up 1 percent to down 1 percent, excluding the impact of gasoline sales.

"Their customer is probably recovering slower than the rest of the market," said David Strasser, analyst at Janney Montgomery Scott.

With unemployment remaining high, analysts said the core Wal-Mart customer is still more skittish about spending money than consumers who are beginning to feel more stable as the economy improves. The most recent jobless claim data on Thursday 13 May showed only a slight drop in the latest week.

At the same time, consumers who have held onto their jobs and enjoy a higher income bracket have become more willing to buy items like clothes and home furnishings, a shift that helps Target, analysts said.

"Right now, they (Wal-Mart) are selling basic apparel, and things that are selling right now are non-basic apparel," said Brian Sozzi, analyst at Wall Street Strategies.

In the first quarter, retailers like Target, Kohl's Corp (KSS.N) and Macy's Inc (M.N) all saw rising same-store sales.

"It has to be coming from somebody and it might be coming at the expense of (U.S.) Walmart," Sozzi said of sales gains at other retailers.

PROFIT UP FOR BOTH

Wal-Mart has focused even more on cash-strapped consumers in recent weeks, cutting prices on thousands of items, especially everyday items like food.

Target, meanwhile, is launching a new advertising campaign, putting more emphasis on discretionary items like apparel, though it is also spotlighting low prices on everyday items.

Both discount retailers are expected to post higher earnings per share before one-time items.

Analysts on average forecast that Wal-Mart will post earnings of 85 cents a share on Tuesday 18 May, up from 77 cents a year earlier, according to Thomson Reuters I/B/E/S.

In February, the company forecast 81 cents to 85 cents a share. It also forecast $3.90 to $4.00 a share for the year. Analysts on average forecast $3.98 for the year.

"I don't think their outlook will change dramatically from what they've laid out," Strasser said.

For Target, due to report on Wednesday 19 May, analysts forecast 86 cents a share for the quarter, up from 69 cents a year earlier. The company said last week that earnings would meet or exceed the average analyst estimate.

Wal-Mart trumped Target and other retailers during the recession as consumers spent only on essentials and new customers sought out Wal-Mart's low prices.

But as the economy recovered, spending patterns shifted, a move that has also shown up in Wal-Mart and Target stocks.

Since the beginning of the year, Target shares are up more than 15 percent, while Wal-Mart is down more than 1 percent, compared with a 5 percent rise for the the Standard & Poor's 500 Index .SPX.

"The first quarter might go a long way in showing whether they maintained the share they won during the recession," Sozzi said of Wal-Mart. (Reporting by Brad Dorfman, editing by Bernard Orr and John Wallace)