Updated from 11:13 a.m. EDT

Retail woes caused the blue light special to flash red as

Kmart's

( KM) earnings plunged 61% and

Lands End's

(LE) - Get Report

earnings tumbled 96% and sales dropped 8%.

However,

Gap

(GPS) - Get Report

posted stronger earnings from a year ago despite a slump in sales at stores open for more than one year.

Meanwhile, shares of discount chain operator

Ames Department Stores

(AMES)

rose 19% after reporting a loss that was a penny less than Wall Street projected. The company also announced that it anticipates meeting expectations for the next three quarters, and shares of

ShopKo Stores

( SKO) rose marginally after the retailer said it met earnings expectations for the quarter.

Also released Thursday was data showing that retail sales

fell 0.2% for April, marking the first sign of weakness since August 1998 and adding a new dimension to speculation over how much the

Federal Reserve

will raise interest rates in the near term. A robust retail report for the month would have made a stronger case for the Fed to hike rates by at least 50 basis points to restrain a surging economy and cool inflation, while today's report could support a smaller rise.

Retail analysts were

split over whether April would bring showers or flowers for the retail sector.

Kmart said Thursday that comparable sales were flat but net income fell to $22 million from $56 million in the same quarter in 1999. For the quarter ended April 28, the Troy, Mich.-based retailer said it had earned 5 cents a share, matching analysts' expectations, according to

First Call/Thomson Financial

, but down from 11 cents a year ago.

Total consolidated sales edged up 1.5% to $8.2 billion from $8.1 billion in the comparable quarter last year, but the retail giant "did not generate the promotional excitement necessary" to post a stronger quarter, according to a statement from Floyd Hall, Kmart chairman, president and chief executive.

Shares of the company's stock were down 3/16, or 2%, to 7 7/16. (Kmart closed down 1/8, or 2%, at 7 1/2.)

Meanwhile, although Wall Street analysts were expecting weakness from Lands' End, they were stung by the news that the Dodgeville, Wis.-based retailer sharply missed estimates Thursday.

Lands End said net income for its first quarter dropped to $292,000 from $6.5 million in the year-ago quarter.

The company posted earnings of a penny per share, well below the 16-cent estimate from First Call/Thomson Financial and the 21-cent per share figure in the year-earlier quarter.

Net sales fell to $266 million from $290 million a year ago. Lands' End said its shortfall in sales was due to a number of factors, including the elimination of the

Willis & Geiger

specialty catalog business, which contributed $11 million in liquidation sales in the first quarter last year, and late mailings of the May primary and women's catalogs.

Shares of Lands End recovered, rising 1 3/4, or 5%, to 36, after reaching a session low of 30 1/16. (Lands End finished up 5 3/4, or 17%, at 40.)

Also in the quarter, Gap sales in comparable stores fell 2% but net earnings rose 16% to $235 million vs. $202 million in last year's first quarter.

The San Francisco-based company posted per-share earnings of 27 cents, in line with the First Call/Thomson Financial mean estimate but up from 22 cents the year-ago quarter.

Shares of the Gap rose 1 1/4, or 4%, to 34 3/8 in midday trading Thursday. (Gap closed up 2 3/16, or 7%, at 35 5/16.)

In contrast, Ames stock leapt 19%, or 2 7/16, to 15, after Joseph Ettore, the chairman and chief executive, said in a statement that improved weather conditions in the beginning of May have yielded improved traffic and sales, enabling Ames to live up to earnings expectations for the remainder of the fiscal year. (Ames closed up 1 5/8, or 13%, at 14 1/4.) For the second quarter, analysts expect earnings of 43 cents a diluted share, according to First Call/Thomson Financial.

For the first quarter ended Apr. 29, Ames reported a net loss of $29.1 million, or 99 cents a diluted share, from a loss of $29.7 million, or $1.24 a share a year earlier. The consensus estimate of analysts polled by First Call/Thomson Financial was a loss of $1.00.

Excluding costs related to the acquisition of

Hills Stores

in 1999, last year's results amounted to a loss of $5.9 million, or 24 cents a share.

Net sales of the company, based in Rocky Hill, Conn., rose to $830.7 million from $816.2 million a year ago.

Like some other retailers, Ettore blamed the weather for the disappointing results. "Unfavorable weather, particularly during the critical month of April, reduced customer traffic in our stores resulting in lower sales and gross profit than planned," he said in a statement.

Shares of Ames rival ShopKo rose 1/4, or 1%, to 19 in midday Thursday trading.

For the first quarter ended Apr. 29, ShopKo's earnings rose to $2.55 million, or 9 cents a diluted share, from $500,000, or 2 cents a share a year earlier, meeting the consensus estimate of analysts polled by First Call/Thomson Financial. The figures exclude a pre-tax charge of $1.2 million, or 3 cents a share, related to the acquisition of rural retailer

Pamida Holdings

.

On May 4, ShopKo said it will sell its

ProVantage Health Services

( PHS) subsidiary to

Merck

(MRK) - Get Report

for about $222 million. Consequently, ProVantage's results for the first quarter are restated as earnings from discontinued operations.

Restated consolidated sales rose to $749.6 million from $549.5 million a year ago.

ShopKo, based in Green Bay, Wis., operates discount stores in the Midwest, West and Pacific Northwest and focuses on higher-margin products such as casual apparel, health and beauty items and housewares.