Retail Braces for Another Tough Month

Pricey oil, bad weather and a struggling consumer could add up to pain.
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Although estimates for September chain-store sales suggest some potential bright spots, the overall tenor heading into Thursday's onslaught of reports is cautious, with energy prices and bad weather still a drag.

After disappointing August and back-to-school selling seasons, a resurgence in oil prices, hurricanes in the southeast and more signs of a wavering consumer, some of America's major retailers show few signs of improvement in September.

"Generally, September should show a mixed bag, with leading retailers doing pretty well, and many other retailers posting more difficult results, exacerbated by bad weather problems throughout the eastern U.S.," said Richard Hastings, chief analyst with Bernard Sands LLC.

Hastings thought that the hurricanes in Florida might have been a boon for super-center and wholesale club retailers, since people were forced to spend on food and repairs. However,

Wal-Mart

(WMT) - Get Report

told analysts over the weekend that its same-store sales, or sales at stores open for at least a year, would likely come in at the low end of its estimate for September -- up 2.3% from the same month last year.

Wednesday morning, Piper Jaffray Analyst Jeffrey Klinefelter downgraded shares of

Gap

(GPS) - Get Report

to market perform, citing his estimate for flat third-quarter same-store sales followed by a 3% gain in the fourth quarter, compared with last year's 5% jump. For September, same-store sales at the Gap are expected to drop by about 2%, compared to the same month last year.

Last week,

Talbots

(TLB)

warned investors that weak September sales are pushing third-quarter earnings down to a range of 45 cents to 50 cents a share, including an 8-cent tax gain. Last year, the company reported third-quarter earnings of 60 cents a share, and analysts were expecting an improvement this year to 66 cents a share. For September, Talbots is expected to report a decline in same-store sales of about 3%.

Elsewhere, Susquehanna Analyst Thomas Filandro said September sales in specialty, softline retailers looked "far from robust," in a research note out Monday, and he said sales of apparel would likely be "much weaker than originally anticipated."

On the bright side, Filandro said

American Eagle Outfitters

(AEOS)

, forecasted to post a 16% jump in comps, would come in strong, along with

The Children's Place

(PLCE) - Get Report

and

Limited Brands

(LTD)

.

Hastings identified American Eagle as a standout. "They nailed the teen fashion trends very successfully, and I think September will still be good for them," he said.

Hastings said sales at department stores, which have enjoyed nearly two years of strength, appear to be moderating, but he pointed to some upscale stores, like

Nordstrom

(JWN) - Get Report

and

Neiman Marcus

(NMG)

, as possible standouts. Nordstrom is expected to post same-store sales growth of 2.5% for the month, while Neiman Marcus is expected to report a jump of 6%.

The National Retail Federation identified strength in upscale retailers as a developing trend likely to affect sales data going into the holiday season in its monthly forecast. High gas prices and sluggish job growth are taking a toll on lower-income spending habits, while middle and higher-income customers move to pricier stores as the overall economy improves.

"Our proprietary teen research indicates that parents are increasingly willing to purchase apparel for their teenaged children at higher-priced specialty retailers and department stores, rather than major chains and value retailers, such as Old Navy," wrote Klinefelter in his report.