Discounts lift retail sales in July

Retailers reported stronger-than-expected sales for July, but the gains were largely due to discounting and do not necessarily signal vigorous consumer spending for the rest of the year.

The sales reports also show signs of troubles are surfacing at some teen apparel chains as the back-to-school shopping season gets into full swing.

U.S. sales at stores open at least a year rose 4.6 percent in July, well above the analysts' average forecast of 3.1 percent. The figures exclude drugstores.

"The consumer has decided to shake off the bad news and is stocking up for back to school," said Madison Riley, managing director of retail consulting firm Kurt Salmon. "All retailers are looking at the second half with caution, so you want to bring in freshness as soon as you can."

Riley and others noted that the earlier start to back-to-school shopping had probably pulled forward some of that business from August and September.

Most retailers offered discounts in July to clear out leftover summer merchandise and make room for back-to-school items and other fall goods.

While July is typically one of the lowest-volume months, it kicks off the back-to-school season, the second-biggest sales period of the year after the winter holidays.

Few on Wall Street expect July numbers to dispel concerns about the U.S. economy, which has been cooling after showing some strength early in the year.

Many industry observers said August would be a better gauge of demand in the U.S. economy than July.

"Most states run their tax-free holidays in August, so people are waiting for that," said Ted Vaughan, a partner in the retail and consumer products practice at consulting firm BDO USA.

Michael Niemira, chief economist of the International Council of Shopping Centers, also expects sales tax holidays in at least a dozen states from Virginia to New Mexico to boost August sales. The ICSC sees August same-store sales, excluding drugstores, rising 4 percent to 5 percent.