Updated from 3:08 p.m. EDT

Fears over Iraq and steep losses in the stock market kept consumers out of the malls in September, suggesting an anemic holiday shopping season could be in store for most retailers.

"The

same-store sales numbers clearly reflect a cautious, almost frightened consumer -- a consumer who is far more ready and eager to hoard money rather than to spend it," said Kurt Barnard, publisher of Barnard's Retail Trend Report.

Sales at U.S. chain stores open at least a year rose just 1.5% last month, according to a Bank of Tokyo-Mitsubishi report. That's the smallest increase since September 2001, when sales inched up a meager 0.9% following the terrorist attacks.

Department stores and specialty retailers posted some of the most disappointing results last month, although discounters fared better as consumers continue to seek out bargains.

Walter Loeb, president of retail consulting firm Loeb Associates, said he has taken down his same-store sales estimates for all segments and is now expecting flat growth in department stores, zero to 2% growth in specialty stores, and 3% growth in the discount sector over the holiday season, which is defined as the period from Thanksgiving until Christmas.

"The continued unhappiness of the consumer is going to be a strong factor to watch," he said.

Consumers are tightening their purse strings for a variety of reasons, none of which are likely to change materially in the coming months. Besides a weak stock market, consumers also are worried about the possibility of rising oil and gas prices if the U.S. goes to war with Iraq.

Furthermore, noted Barnard, consumers have recently purchased a record number of homes and automobiles, leaving them with less money to spend in stores. And if that weren't enough, weakness in the labor market continues to be a concern.

"We are currently dividing consumers into two groups: those that have jobs and are worried about losing them and those who have already lost their jobs and can't find a replacement," Barnard said. "That is not the kind of environment that is propitious for going on buying binges and spending sprees."

Barnard expects same-store sales to rise just 2.5% over the holiday season.

But not everyone agrees that the consumer is buckling.

Ulysses Yannas, a retail analyst at Buckman Buckman & Reid, said consumers have merely been deferring purchases, and that spending will likely rebound in the coming weeks.

"I personally think we're going to have a better Christmas than people think," he said. "If the environment overall is so terrible, why did some of these guys do better than others?"

Wal-Mart

(WMT) - Get Report

posted a 3.3% gain in same-store sales, the lower end of its reduced forecast, and predicted that October sales would rise just 2% to 4%. Other merchants, such as

Target

(TGT) - Get Report

,

Talbots

(TLB)

and

Federated Department Stores

, lowered their earnings projections for the rest of the year as a result of weak sales.

Still,

Limited Brands

(LTD)

posted a 6% jump in comparable sales, much better than analysts had estimated, and

Neiman-Marcus Group

(NMGA)

said September sales jumped 16.1%.

Analysts said those companies were helped by weak comparisons to last year. But Yannas, who is looking for 3% to 4% growth in same-store sales over the holiday period, believes that some companies may be using the sluggish economy and the West Coast port shutdowns as an excuse, in much the same way that retailers often blame the weather or other seemingly uncontrollable events.

"The employment level is low and real income is going up," Yannas said. The real problem, he added, is that aggressive cost cuts at some companies have come at the expense of poor service, which may be driving customers away.

Russell Jones, a retail consultant at Cap Gemini Ernst & Young, agrees that weakness in the economy "is not overwhelming" and said the refinancing boom has provided investors with plenty of disposable income.

"What we saw today reflects a certain failure to pay attention to consumers," he said. "Those retailers who have been suffering long-term declines in sales need to re-examine what their consumers are telling them they want."

Jones said many department stores and apparel retailers have been offering remarkably similar merchandise and haven't provided a compelling reason for customers to shop. Whether or not retailers will address these issues going into the holiday season remains unclear.

Despite a host of disappointments Thursday, the S&P retail index actually rose almost 2% to 258, aided by a 6% jump in Federated and 2% increase in Wal-Mart. Still, the retail index has fallen almost 12% in the last three weeks alone, dragging many retailers to 52-week lows.