New York, NY, Oct. 15—The outlook for the holiday season grew more uncertain as the nation's largest retailers, whose already sluggish sales stalled following last month's terrorist attacks, reported the weakest September results in decades.

Wal-Mart Stores and deep discounters such as Dollar General were the big winners. Department and apparel specialty stores, which have been languishing for months, were hit even harder as more consumers shunned discretionary items in favor of basics.

But some stores, including Michaels Stores, a crafts retailer, reported strong results as consumers retreated to their homes.

“Even before September 11, retail sales would have been mediocre at best. The attacks worsened the economic situation,” said Kurt Barnard, president of Upper Montclair, New Jersey based Barnard's Retail Trend Report, citing more massive layoffs and a volatile stock market. “Consumers are becoming even more bargain hunters.”

Consumer spending that stalled after the attacks has since rebounded to what are near normal levels for a sluggish economic environment, but Wall Street analysts and retail executives remain wary about the holiday season. Companies are still cutting jobs, and another terrorist attack on U.S. soil could again derail consumer spending.

“The issue is how resilient will consumers be in the face of more layoffs,” said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. “We have seen a slowdown, but the question is: Is there another leg?”

The Bank of Tokyo-Mitsubishi Index registered a gain of 0.8%, making it the weakest September in 30 years. Without Wal-Mart, which accounts for 25% of the index, the indicator was down 2% for the 78 stores Niemira tracks.

Jeffrey Feiner, managing director of Lehman Brothers, said his company's retail index, which follows 22 companies, registered its lowest September reading—a 1.4% gain—in the 20 years since it was first compiled.

He said he is halving his holiday forecasts to a 2% gain, and is reducing earnings estimates on more than a dozen retailers.

Wal-Mart, which is taking market share away from department stores, reported a robust 6.3% gain in same store sales, which tracks business in stores open at least a year. Analysts surveyed by Thomson Financial/First Call had expected a 5% gain.

Kmart said same store sales in September were unchanged from a year ago and were about in line with analysts' projections of 0.3%. Value oriented chain Kohl's reported a solid 4% gain in same store sales, while Dollar General had a 9% gain.

Most department stores as well as specialty apparel stores, including those catering to teens, performed poorly. That prompted companies including May Department Stores, Gap Inc., TJX Cos. and AnnTaylor Stores to reduce their earnings forecasts.

The hardest hit have been upscale department stores like Neiman Marcus Group, which last week reported a 19.5% drop in same stores sales, as consumers pull back from big ticket luxury goods.

Federated reported a 12.9% slide in same store sales, although its results came in a bit better than its reduced forecast issued last month. The company said business improved toward the end of the month. While Federated said it is difficult to forecast future sales, it believes same store sales for October will be down 7% to 10%.

Meanwhile, Michaels said its same store sales rose 10%, while total sales were up 18%. Apparently many consumers sought the comforts of home last month, buying crafts and home furnishings.

A pleasant surprise came earlier from J.C. Penney Co., which reported that same store sales rose 8.1% in its department store business.

September accounts for 9.4% of retailer's annual sales, making it the third most important month of the year, behind December and June, according to Niemira.

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