TORONTO (Reuters) - Canadian consumer staple stocks have been a good bet in bad times, with the steady profits of grocers and drugstores offering comfort to battered investors, but savvy shareholders may soon start turning to more cyclical plays.

Beaten-up retailers, particularly in the home improvement sector, are tipped to outperform as the economy begins to recover from the worst financial crisis since the Great Depression.

The key, analysts said, is keeping a close eye on forward-looking economic indicators, especially those tied to employment and confidence, that will herald a revival of consumer discretionary plays.

"As the market gets stronger and as people start moving away from safety ... you should see the discretionaries start to perform better than the staples," said Brian Yarbrough, a retail analyst at Edward Jones in St Louis, Missouri.

The Toronto Stock Exchange's consumer staples index , home to the country's top grocery stores, has slipped just 3.3 percent over the past two quarters, compared with a 26.2 percent drop in the S&P/TSX composite index .

During that same period, the consumer discretionary index has followed the performance of the broader market with a drop of 21.4 percent.

Consumer staple stalwarts like grocers Loblaw Cos and Empire Co, and pharmacy chain Shoppers Drug Mart have all delivered results that have met or beaten expectations, proving resilient in the face of the slowing economy.

"They are weathering the downturn," said Sarah Chaisson, an equities analyst at Beacon Securities in Halifax, Nova Scotia.

But analysts said the safe-haven status of staples providers will lose its lustre on the first indications the sliding economy has begun to turn.

Yarbrough said "less worse news" on the economy would be good news for consumer discretionary heavyweights like Canadian Tire Corp, which he said would benefit "first and the most" from a recovery. The auto parts and household goods retailer has seen its stock tumble 29.4 percent in the past year.