Office Depot, PetSmart, Rite Aid Lead Retail Shares Lower

NEW YORK (TheStreet) -- A later back-to-school start date and a shift in the tax-free holiday kept sales during the first week in August steady, but shares of retailers still fell on Tuesday as investors awaited earnings reports.

According to the International Council of Shopping Centers and Goldman Sachs, sales during the week that ended Aug. 8 remained unchanged, but on a year-over-year basis increased 0.4%.

"Overall, the sales performance should improve as comparisons begin to get easier and the economy is showing signs of recovery," Michael P. Niermira, ICSC chief economist, said in a statement.

Nonetheless, ICSC still expects August same-store sales to fall between 3.5% and 4%.

Most retailers were in the red in morning trading, with the S&P Retail Index off 1% to 362.02, as investors anxiously await earnings reports from major players like Wal-Mart Stores(WMT Quote) and Macy's(M Quote) later in the week.

PetSmart(PETM Quote) was one of the biggest losers, falling 4% to $21.79 after it was downgraded to neutral from overweight by an analyst at J.P. Morgan. Analyst Christopher Horvers cited the company's high stock price and cutbacks by shoppers in discretionary purchases as reasons for the downgrade, along with his sense that PetSmart's investment will take longer than expected to produce results.

Department stores were also feeling a pinch as analysts weighed in on what's in store for Macy's earnings report due out tomorrow before market.