Retail sales boosted by discounters in May

CHICAGO (Reuters) - U.S. retailers reported a mixed bag of May sales results on Thursday, with consumers focused on lower prices and essentials like food, but signs emerged that tax rebates were helping spur some spending.

While many discount and warehouse stores topped analysts' lowered expectations, department store operators continued their struggles as U.S. consumers spent cautiously.

"We have this clear divide in where the strength is and where it isn't," said Michael Niemira, chief economist for the International Council of Shopping Centers. "The strength seemingly was in the less discretionary areas -- like discount, drugs and wholesale clubs."

Wal-Mart Stores Inc (WMT.N), the world's largest retailer, posted a better-than-expected 3.9 percent increase in sales at U.S. stores open at least a year, excluding gasoline sales. Analysts' average forecast was 1.6 percent, according to Thomson Reuters data.

Wal-Mart said it has seen some benefits from tax rebates consumers began receiving in late April as part of the $152 billion economic stimulus package passed by the U.S. Congress.

Wal-Mart shares were up more than 3 percent, while retail shares in general, as measured by the Standard & Poor's Retail Index .RLX, were up almost 2 percent.

"It looks like stimulus checks are having an impact this month," said Ken Perkins, president of Retail Metrics, noting that many retailers were beating Wall Street expectations.

Costco Wholesale Corp (COST.O), the largest U.S. warehouse club, said higher prices for gasoline helped it post a 9 percent rise in same-store sales, besting an average Wall Street estimate of 6.9 percent.

U.S. consumers, who have been hammered by a combination of rising food and gasoline prices and falling home values, have turned to lower-priced retailers to stretch their dollars.

With consumer spending making up 70 percent of the U.S. economy, retailers' monthly sales reports are closely watched for signs of how deep the economic slowdown has become.

One higher-end department store chain, Nordstrom Inc (JWN.N), did beat estimates with a 10.9 percent increase in May same-store sales. But that was helped by the shift of a major sale event to May this year from June last year.

"It's driven by promotion," Sarah Henry, retail analyst at Sovereign Asset Management, said of the current retail environment. "People are willing to spend, but only if they know they are getting a good deal." Sovereign holds Wal-Mart shares and manages Nordstrom shares for clients.

Even the better-than-expected sales are coming against weak estimates. Overall, analysts' average same-store sales estimate was an increase of 1.2 percent for May, compared with a 2.9 percent rise a year earlier, according to Thomson Reuters.

In addition to the slumping economy, retailers also faced colder-than-normal weather last month, crimping sales of warm-weather clothing. It was the coldest May since 2002, according to Planalytics, and Wal-Mart said sales of seasonal merchandise that depend on the weather were soft.

BJ's Wholesale Club Inc (BJ.N) posted a larger-than-expected 13.4 percent rise in same-store sales, helped by higher prices for the gasoline it sells. It said air conditioners and summer seasonal goods were among the weakest categories.

Among retailers with lower-than-expected sales were department store operator Bon-Ton Stores Inc (BONT.O), whose same-store sales fell 9.9 percent, compared with an expected drop of 5 percent, and Victoria's Secret owner Limited Brands Inc (LTD.N), which posted a 6 percent decline, versus an estimate of down 5.5 percent.

Gap Inc (GPS.N) posted a 14 percent drop, compared with an average estimate of 9.5 percent.

Teen and children's apparel retailers were among those beating estimates, with Children's Place Retail Stores Inc (PLCE.O) up 10 percent, compared with an average estimate of 4.3 percent, and Buckle Inc (BKE.N) up 34.7 percent, compared with an average estimate of 13 percent.

Department stores other than Nordstrom continued to be hurt by the weak economy. J.C. Penney (JCP.N) same-store sales fell 4.4 percent -- though that beat the average estimate of down 5.8 percent -- and Saks Inc (SKS.N) posted a worse-than-expected 8.7 percent decline.

(Reporting by Brad Dorfman; editing by Dave Zimmerman and John Wallace)