Retail Faces Tough September

August looks solid, but Katrina's impact portends trouble.
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Updated from 9:39 a.m. EDT

Retail chains reported mostly solid August sales Thursday, but analysts predicted a tumultuous September as the hardships of Hurricane Katrina take effect.

Retail Metrics reported that its index of major retail chains posted an overall same-store sales gain of 3.8% in August from a year earlier, beating its estimate for an increase of 3.7%. It said 68% of the companies included in its index beat Wall Street's expectations.

Ken Perkins, president with Retail Metrics, attributed some of the strength to easy comparisons, as well as lowered expectations in the wake of disappointing second-quarter earnings reports. But he also said that consumers were displaying durability in their spending habits.

"The job market is holding up fairly well, and consumers are not saving their money," Perkins said. "They're still spending."

Perkins said results will probably be somewhat depressed in the coming months as a result of the devastation wrought by Hurricane Katrina. While retailers like

Home Depot

(HD) - Get Report

and

Lowe's

(LOW) - Get Report

could benefit from rebuilding efforts, other chains, like

Dollar General

(DG) - Get Report

, are suffering severe disruptions at stores along the Gulf Coast.

Meanwhile, the storm dealt a knockout blow to the nation's oil supply lines at a time when the energy markets were already strained. Gas prices are expected to soar, which could cause cutbacks in consumer spending throughout the U.S.

Among companies,

Wal-Mart

(WMT) - Get Report

said its same-store sales, or sales at stores open at least a year, rose 3.3% at U.S. stores in August from the same month last year, hitting the low end of its estimated range.

The world's largest retailer expects its comps to rise between 2% and 4% in September. Its total sales in August were up 10% to $23.33 billion.

Wal-Mart's chief rival,

Target

(TGT) - Get Report

, continued to outperform. It posted a 6.3% gain in same-store sales, beating estimates on Wall Street. Its total sales rose 12.2%.

Another discount retailer,

Costco

(COST) - Get Report

, said its August comps rose 9%, beating Wall Street's estimates. Its international stores saw August same-store sales rise 11%, while domestic same-store sales were up 9%. Costco's total sales increased 12% to $4.09 billion for the month.

Among department-store chains,

Federated

(FD)

reported a same-store sales gain in August of 1.1%, a bit weaker than expected. Its total sales rose 1.3% for the month to $1.069 billion.

J.C. Penney

(JCP) - Get Report

reported its same-store sales rose 2.8%, in line with expectations. Total sales for four weeks ended Aug. 27 increased 3.2% to $1.57 billion.

In luxury, or high-end retailing,

Neiman Marcus

(NMG.A)

beat expectations, reporting a same-store sales gain of 8.2% in August. Its total sales were up 6.5% to $255 million.

Nordstrom

(JWN) - Get Report

said its comps rose 8% for the month, roughly doubling Wall Street's estimates. Its total sales rose 9.5% to $472.9 million.

In specialty apparel retailing, monthly results from

Gap

(GPS) - Get Report

fell short of expectations, which were already low. The company said its August same-store sales dropped 9%, and its total sales were down 5% to $1.17 billion. Gap North America division same-stores sales fell 7% in August, Gap International fell 6%, Banana Republic North America fell 6% and Old Navy North America fell 11%.

Limited Brands

(LTD)

was also a disappointment. It reported a 3% drop in same-store sales. Its total sales were roughly unchanged from a year ago at $575.3 million, and it expects its comps to be flat in September, compared to the same month last year.

Wet Seal

(WTSLA)

continued its winning streak, demonstrating that its turnaround efforts are still gaining traction. The mall-based, teen clothing chain reported a 48.3% increase in same-store sales, beating high expectations for a 33.1% gain. Its total sales rose 14.8%.

Chico's

(CHS) - Get Report

said its August same-store sales beat estimates, up 14% for August. Its total sales rose 32% to $101.5 million.

Late Wednesday,

American Eagle Outfitters

(AEOS)

said its same-store sales rose 11.8% from last year in August. Its results were in line with Wall Street's forecast. The retailer's total sales rose 18.7% to a record $236.9 million for the month, compared to last year's $199.6 million.

Aeropostale

(ARO)

reported its monthly comps rose 1.3%, while analysts were expecting a small decline. Its total sales rose 21.8% to $136.5 million, compared to $112.1 million in the same month last year.

A newcomer to the space,

Zumiez

(ZUMZ) - Get Report

reported a same-store sales gain of 9.4% in August. Its total sales were up 25.1% to $24.7 million from last year.

Starbucks

(SBUX) - Get Report

hit the high-end of its long-term sales target in August. The java giant posted a same-store sales gain of 7% for the month, compared to August of last year. Its total sales rose 21% for the month to $508 million.

"During August, we continued to see strong customer demand for Starbucks handcrafted beverages, particularly our new Tazo Green Tea platform," the company said. "Our food program enhancements also contributed positively to strong revenue growth." 1.