Third-quarter retail earnings will likely outperform earnings from the rest of corporate America this reporting season, but don't expect retail stocks to do the same.

With over half the

S&P 500

companies on the books for the third quarter, Thomson First Call is estimating overall earnings growth of about 15% over the same quarter last year. That would mark a drop from the 25% year-over-year growth posted in the second quarter.

Meanwhile, the bulk of retailers are scheduled to report at the tail end of the season, in early to mid-November. Companies in the Dow Jones Index of Retailers are expected to show earnings growth of 22% for the quarter, up from 21% in the second quarter, according to Thomson's estimates. Investors appear to have anticipated the performance, bidding the S&P Retail Index up 14% since Aug. 6, while the S&P 500 is up just 3% during that span.

"Growth in the retail industry is still pretty decent compared to others," said Richard Hastings, a retail analyst with Bernard Sands LLC. "Despite all the wholesale pipeline inflation, not a lot of that gets passed along, so when you start to look at retailer earnings, most of the inflationary problems that are hurting margins in other industry don't have so much of an effect on the retail industry."

However, the stock market is a forward-looking mechanism, and while earnings for the S&P 500 are expected to keep pace at 15% growth in the fourth quarter, Thomson said earnings growth for retailers is expected to cool to 13%. For 2005, analysts forecast overall earnings growth at 10.7%, while retailers are projected to average 17% growth.

"We think this year's holiday sales should be somewhat weaker than last year, and some things that benefited last year's sales will not be repeated this year, like cash-out refinancing, tax cuts and lower energy prices," said Michael Sheldon, chief market strategist with Spencer Clarke LLC.

Sheldon pointed to some of Wall Street's favorite specialty retailers that he thinks are particularly over-valued, including

Chico's

(CHS) - Get Report

and

Pacific Sunwear

(PSUN)

.

"Consumer discretionary in general has been one of the areas that I think investors should underweight," Sheldon added. "With all the uncertainties facing the market these days, I think you have to be very cautious on consumer related stocks."

Given the anticipated slowdown, along with record oil prices and the string of disappointing reports on consumer attitudes, there is some doubt that a series of upbeat reports from retailers over the next few weeks will amount to any lasting gains in their stock prices.

"The outlook for consumer spending next year is not very bullish," Hastings said.

A few retailers have reported already this season, with mixed success.

Sears

(S) - Get Report

swung to a loss, falling short of estimates and lowering guidance for the fourth quarter. Its stock is down over 12% since it reported last Thursday.

Elsewhere,

Coach

(COH)

, posted a 62% jump in first-quarter earnings on Tuesday, beating estimates and raising its guidance for 2005. Its stock was recently up $2.48, or 5.9%, to $44.20.

The world's largest retailer,

Wal-Mart

(WMT) - Get Report

, is scheduled to report Nov. 16, along with others like

Nordstrom

(JWN) - Get Report

,

J.C. Penney

(JCP) - Get Report

,

Staples

(SPLS)

and

Home Depot

(HD) - Get Report

.

Wal-Mart is expected to reveal quarterly earnings of 52 cents a share, up from last year's 47 cents a share. Still, investors have frowned at Wal-Mart's same-store earnings growth in recent months. The company showed a gain of 2.4% in September and maintained its subdued growth target of 2% to 4% for October. Its shares have shed 0.6% in October.

Wal-Mart's chief competitor,

Target

(TGT) - Get Report

, has become a Wall Street darling, with its 5.6% gain in September comps. Its stock is up 7.2% in October, while analysts forecast third-quarter earnings of 37 cents a share, up from 33 cents a share in the same quarter last year.

Target's earnings are scheduled for Thursday, Nov. 11, along with

Kohl's

(KSS) - Get Report

,

The Buckle

(BKE) - Get Report

and

Tiffany

(TIF) - Get Report

.

Also due in the third week of November are retailers like

Gap

(GPS) - Get Report

,

Men's Wearhouse

(MW)

,

Talbots

(TLB)

and

Hot Topic

(HOTT)

.

Hastings said he thinks an overall positive quarter may give some added boost to the S&P Retail Index in November, but he expects the index to start losing ground later in the fourth quarter.

"The retail index is moving up because it's not as vulnerable to inflation," he said. "I think it will probably retreat later on as we get into fourth-quarter earnings releases, and we'll start to see that sector rotation."

The index was recently up 1.1% on Tuesday.