Stimulus checks helped drive up retail sales in June

NEW YORK — Shoppers, enticed by heavy discounts and armed with rebate checks, spent freely in June, helping to lift retailers' sales. The outlook for the back-to-school season remains tough, though, as consumers confront high gas and food prices, a slumping housing market and tighter credit.

The nation's retailers on Thursday reported a better-than-expected June gain of 4.3 percent, with discounter Wal-Mart Stores Inc. accounting for the majority of the gain.

Wholesale club operators BJ's Wholesale Club Inc. and Costco Wholesale Corp. were also among the best performers. Some rebate money made its way to clothing stores, like Children's Place Retail Stores Inc., though sales generally remained sluggish at mall-based clothing stores, including Limited Brands Inc. and Gap Inc.

The preliminary tally by UBS-International Council of Shopping Centers beat projections for a 2 percent to 3 percent gain, according to Michael P. Niemira, chief economist at ICSC.

However, excluding Wal-Mart's robust gain, the sales tally was up 1.9 percent, though it was slightly better than the 1.1 percent average seen so far this fiscal year, which for retailers begins in February.

The results come on top of a better-than-expected 2.9 percent gain in May as the rebate checks

began arriving. The tally is based on same-store sales, or sales at stores opened at least a year, and are considered a key indicator of a retailer's health.

Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said the rebate checks provide only a "one-time bump." "The back-to-school season is going to be challenging," he said.

June, the second-most-important month in a retailer's sales calendar, is a time when merchants clear out summer goods to make room for back-to-school merchandise. Customers found some good deals.

Merchants appear to be more aggressive about discounts than last year as fears about the economy have dragged consumer confidence to the lowest level in 40 years. Barneys New York is offering up to 75 percent off on designer merchandise, while Banana Republic has discounts of up to 60 percent.

Perkins said the discounts have generally been planned well in advance and stores have been prudent about keeping lean inventory, so second-quarter earnings results shouldn't be a disaster.