By Heather Burke
Bloomberg News
Friday, July 11, 2008

Wal-Mart and Costco led U.S. retailers reporting higher June sales yesterday as consumers used their tax-rebate checks to buy discounted groceries and swimsuits at summer clearance events.

Most retailers' shares fell because of investor concerns that the effect of the stimulus checks will be short-lived. Rising gasoline prices, six straight months of U.S. job cuts and declining home values are sending shoppers to Wal-Mart, which accounted for more than half of the industry-wide sales gain.

"The outlook for the consumer continues to deteriorate," said Steven Baumgarten, a retail analyst at PNC Capital Advisors in Philadelphia, with $65 billion under management. "It's hard to get excited."

Sales at U.S. stores open at least a year rose 4.3 percent in June, according to the International Council of Shopping Centers. The gain was higher than the ICSC's prediction of a 2 to 2.5 percent rise. Excluding Wal-Mart, sales jumped 1.9 percent, the group said.

Same-store sales climbed 5.8 percent at Wal-Mart, the biggest increase in four years. The company said that second-quarter profit would be higher than it previously forecast. Costco sales rose 9 percent, while analysts estimated an 8.1 percent gain.

"Wal-Mart is not reflective of the broader industry," ICSC Chief Economist Michael Niemira said. "It is representative of the kind of shift you would typically get in a recession."

Target said June same-store sales advanced 0.4 percent, better than estimates for a 0.7 percent decline. Kohl's said sales gained 2.3 percent.