By Nicole Maestri

NEW YORK (Reuters) - More than half of U.S. retail chains posted October sales that fell short of Wall Street's heightened expectations, raising doubts about a widespread recovery for the holiday season.

Department store chains and teen retailers in particular disappointed investor expectations, while such disparate companies as apparel retailer Gap (GPS.N) and luxury store chain Saks Inc (SKS.N) performed better than hoped as consumers return to spending selectively.

"October results are not going to give investors the overall warm and fuzzy that we're on track for a strong Christmas," said Brean Murray, Carret & Co analyst Eric Beder, "It looks like we're on track for kind of a mediocre season right now based upon October."

Retail shares reflected the mixed results. Teen retailers Aeropostale (ARO.N) and American Eagle Outfitters (AEO.N) fell 13.6 percent and 12 percent, respectively. Mid-priced department store J.C. Penney (JCP.N) fell 6.5 percent, and Kohl's (KSS.N) shed 2.9 percent, while Saks gained 1.8 percent.

Industry forecasts for the holiday season range from a slight decline for retail sales to a slight increase, and many insiders say it is difficult to reach a firm prediction.

In the most bullish of forecasts to date, the International Council of Shopping Centers said on Thursday 5 November it expects retail same-store sales to rise 5 percent to 8 percent in November. It has forecast holiday same-store sales to rise 1 percent.

However America's Research Group founder Britt Beemer says total retail sales will most likely fall 2.9 percent during the season as a whole, according to a forecast issued on Thursday 5 November.

"I don't see anything out there that says October was an exciting month even with retailers advertising 60 percent off," he said.

2008 A HORRIBLE BENCHMARK

Sales were expected to improve from last year, when consumers all but stopped spending in the face of a financial crisis. Analysts had steadily raised their estimates for the month, buoyed by bullish forecasts from retailers like J Crew Group (JCG.N) and Amazon.com (AMZN.O).

Total October same-store sales rose 1.8 percent, below an estimate for a 2 percent gain, according to Thomson Reuters data. Fifty-two percent of retailers came in below expectations while 44 percent beat forecasts.

But it marked the strongest showing since June 2008, when sales rose 1.9 percent. Last October, same-store sales plunged 4.1 percent.

"If you show a 2 percent increase over a bad performance, it's still a bad performance," said Brian Girouard, global leader of Capgemini's consumer products and retail practice. "There's good news, but remember the benchmark was horrible."

While sales may be disappointing, analysts said retailers have slashed inventory to help protect profits.

"The holiday season will be profitable for the retailers, but the sales might not be significantly different from last year," Girouard said.

For instance, TJX Cos (TJX.N) posted a 10 percent increase in same-store sales, narrowly missing analysts' expectations, but said it now expects per-share earnings for the third quarter to be at or slightly above its recently raised range of 77 cents to 79 cents.

Aeropostale now expects to earn 90 to 91 cents per share in the third quarter, up from its prior view of 84 cents to 85 cents per share.

J.C. Penney's same-store sales fell 4.5 percent, worse than analysts' forecasts for a 2.3 percent drop. But it raised its view for third-quarter earnings to 10 cents to 11 cents per share, from a prior view of 3 cents to 10 cents per share.

(Additional reporting by Brad Dorfman, Benjamin Klayman and Jessica Wohl in Chicago, Aarthi Sivaraman in Seattle, Martinne Geller and Dhanya Skariachan in New York; editing by John Wallace, Dave Zimmerman)