U.S. clothing retailers like Gap Inc. (GPS) and American Eagle Outfitters (AEOS) saw their shares rise Thursday after their August same-store sales soothed fears of a bleak back-to-school shopping season.

The share rise made apparel companies among the best performing sectors Thursday. Wall Street had worried that late-summer sales for specialty apparel companies would be dismal compared with last year, when child tax credits inflated sales.

"Most of them met reduced expectations," said Eric Beder, retail analyst at J.B. Hanauer & Co.

Analysts had also feared that August sales would suffer from the shift of the Labor Day weekend, a key part of the back-to-school shopping season, into the September sales reporting period.

Those fears will be transplanted into September, but for now, investors are breathing "a sigh of relief," Beder said.

Gap posted a 1 percent drop in August sales at its stores open at least a year. But the San Francisco-based retailer's results were well above the 2.5 percent decline analysts polled by Thomson First Call had been expecting.

Gap also reported solid sales of key fall items such as women's fashion denim at Gap, pants at its Banana Republic stores, and women's blazers at its lower-priced Old Navy stores.

The company's shares, the most actively traded on the New York Stock Exchange (search), surged $1.09, or 6 percent, to $20.09, posting their biggest one-day percentage gain in about seven months.

American Eagle Outfitters , whose colorful, preppy styles have seen strong sales throughout the summer, Wednesday posted a 27 percent surge in August same-store sales and raised its third-quarter profit forecast. Its shares jumped $2.26, or 7 percent, to $36.42 on Nasdaq.

The company's results easily cruised past Lazard analyst Todd Slater's expectations for a 19 percent jump in sales, which was on the high end of Wall Street's expectations, he wrote in a research note.

"We see upside in the stock," Slater wrote, adding he had raised his 12-month price-target on the company's stock to $45 from $44.

The Children's Place Retail Stores Inc. (PLCE) also saw its shares surge after it reported a 21 percent gain in August sales and raised its earnings forecast for the full year.

The company said it expected its 2004 earnings to rise 50 percent over last year's 85 cents per share results, putting its earnings in the range of $1.27 to $1.28 per share. That would beat Wall Street forecasts for about $1.21 per share.

Its shares jumped $2.52, or 13 percent, to $21.52 on Nasdaq.

The Standard & Poor's Apparel Retailer index (search) rose 3.6 percent Thursday.

Retailers had been hinting at a sluggish start to the back-to-school season, the second-most important sales period behind the winter holiday shopping season, as worries about interest rates and higher gasoline prices bit into consumers' budgets.

Questions about the impact of Hurricane Charley (search) and the shift of tax holidays in several states out of the month of August fed fears and helped pummel shares of apparel retailers throughout much of August.

Overall, August same-store sales were lackluster, rising just 1.0 percent to post their smallest gain in about a year and half. The results fell well short of forecasts for a 2.2 percent rise, according Thomson First Call.

"Most of the misses came from the discounter and department store sectors, while specialty apparel saw more upside," Emme Kozloff, senior research analyst at Sanford C. Bernstein & Co. wrote in a research note.