Retailers will start capping off the second-quarter earnings season this week, and barring any unforeseen carnage, the sector should extend its impressive streak of double-digit profit growth to six quarters in a row.

Research firm Retail Metrics reports that its index tracking more than 130 major U.S. retail chains is expected to show a 10.7% increase in second-quarter earnings from the same period last year. That's slower than the 16.1% profit growth now projected for the

S&P 500

, according to Thomson Financial. Still, it's a decent rise for a sector beset by investor trepidation about consumer spending going into the back half of 2006.


S&P Retail Index

shed 5% in July, while the broader index moved down only fractionally, as the softening housing market, rising interest rates and high gas prices led many investors to conclude that consumers are running out of spending power. But for the most part, whatever weakness may lie ahead has yet to show up on retailers' bottom line.

"This just goes to show that the economy is moving along at a good pace, consumers are still spending at a relatively decent pace and retailers haven't had to start lowering prices too much to keep people in their stores," says Ken Perkins, Retail Metrics' president. "By and large, their inventories have been in good shape, and they haven't gotten hit on margins, except for a few stragglers."

According to Thomson Financial, specialty chains are expected to lead earnings growth for the sector. Analysts are expecting a 32% profit gain from that space over last year, led by office-supply chains like




Office Depot

(ODP) - Get Report




, which already doubled Wall Street's estimates when it reported last week.

Department stores also are expected to be strong, with 22% growth.

Federated Department Stores

( FD) is expected to report second-quarter earnings Wednesday of 44 cents a share, up from last year's 42 cents. Meanwhile, the current department store star,

J.C. Penney

(JCP) - Get Report

, is scheduled to report its earnings on Thursday, and analysts predict a profit of 72 cents a share, up sharply from 46 cents a year earlier.

The expected 10% growth for discounters and general merchandisers likely will be led by


(TGT) - Get Report

, which is expected to report earnings per share of 69 cents Thursday, up from last year's 61 cents.

Target put Wall Street on edge in July when it reported its monthly same-store sales, or comps, gained 3.1%, hitting the low end of its forecast. Still, the discount giant said it expected to meet or beat analysts' earnings forecast.

The market will hear from Target's main competitor,


(WMT) - Get Report

, next Tuesday. Analysts are looking for Wal-Mart's earnings to climb to 72 cents a share from 67 cents a year earlier.

Tuesday will be a huge day for the retail sector, with the likes of

Home Depot

(HD) - Get Report


BJ's Wholesale Club

(BJ) - Get Report


Abercrombie & Fitch

(ANF) - Get Report


American Eagle Outfitters

( AEOS), also set to report, among others.

The red-hot teen-apparel chains, like American Eagle and Abercrombie, are expected to stay strong, but apparel-focused chains as a whole are expected to post a 20% year-over-year decline. Investors got hints of that Tuesday when

Urban Outfitters

(URBN) - Get Report

said its second-quarter same-store sales fell 7% due to "missed fashion opportunities."

The trendy clothing chain will report earnings Thursday. Analysts predict profits of 16 cents a share, down from last year's 18 cents a share, though that forecast was made before the company's warning Tuesday.


(GPS) - Get Report

will provide the biggest weight on the apparel space, as each of its brands continue to lose favor with customers. The specialty empire, slated to report its results a week from Thursday, lowered expectations last week when it reported a 4% decline in July same-store sales. The company said its second-quarter earnings would be 13 cents to 15 cents a share, while Wall Street was expecting a profit of 22 cents a share.

Gap said it "decided to take aggressive markdowns in July to clear product and enable a clean presentation of fall assortments, which arrived late in the month." That resulted in lower profit margins.

Along with Gap, investors expect to hear from

Sears Holdings



Limited Brands




(JWN) - Get Report




and others Aug. 17.

While overall earnings are holding up nicely for the quarter, Richard Hastings, a retail analyst with Bernard Sands, expects growth to slow in the third and fourth quarters.

"There's a core group of retailers out there now that's able to keep gaining market share these days, even as consumers moderate their spending, but everyone else in the industry is going to be facing a promotional environment and tougher comparisons later this year," says Hastings. "I don't know how many double-digit quarters retailers have left in them."