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Retail Sales Fall, Auguring Slow Recovery (Update)

Retail sales in July unexpectedly declined, creating a blip in the retail recovery.

(Updated with analysts' comments and afternoon stock movements.)

WASHINGTON (

TheStreet

) -- That retail recovery investors were hoping for could be a bit further off, as retail sales fell unexpectedly in July.

The Commerce Department said on Wednesday that total sales slipped 0.1% during the month compared with a revised 0.8% jump in June. Analysts actually expected July sales to grow 0.7%, predicting a gain in automobiles from the "cash for clunkers" program.

Excluding motor vehicles and parts, sales were off 0.6% in July after rising 0.5% the prior month.

But it was gasoline stations and building materials that weighed the most on sales, both declining 2.1% during the month.

What's more alarming, however, is when you look at July sales compared with last year, says Kevin Regan, senior managing director and retail industry expert at global advisory firm FTI Consulting.

In that case, retail sales are down 8.1% on a year-over-year basis.

"Retailers are blaming everything from the weather to the later start to back-to-school and shift in tax free holiday," Regan says. "But really it's a bigger issue -- consumers are saving more and spending less."

While apparel retailers have managed to start reporting profits in the second quarter, sales are still a drag on business.

Sales in general merchandise stores, which include

Wal-Mart Stores

(WMT) - Get Walmart Inc. Report

and

Target

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(TGT) - Get Target Corporation Report

, declined 0.8%.

Earlier today Wal-Mart's earnings report left a sour aftertaste, as same-store sales fell 1.2% during the second quarter.

Department store sales fell 1.6% in July compared with June.

Kohl's

(KSS) - Get Kohl's Corporation Report

said this morning that its

comparable sales sank 2.3%

in its quarter, and on Wednesday

Macy's

(URBN) - Get Urban Outfitters, Inc. Report

reported a 9.5% plunge.

Clothing and accessories stores were one of the few bright spots, gaining 0.6% during the month. But

Urban Outfitters

(URBN) - Get Urban Outfitters, Inc. Report

said its second-quarter same-store sales were off 6% and

Abercrombie & Fitch

(ANF) - Get Abercrombie & Fitch Co. Class A Report

is expected to post dismal results on Friday.

Shares of retailers were mostly in the red Thursday afternoon, with the S&P Retail Index down about 1% to $364.35.

J.C. Penney

(JCP) - Get J. C. Penney Company, Inc. Report

was off 4% to $31.98 and

Nordstrom

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declined 2% to $28.78 ahead of their earnings reports. Rivals Macy's dropped 3% to $15.98 and Kohl's fell 2% to $51.35.

But there were several gainers. Wal-Mart was up 2% to $51.48, Urban Outfitters grew 2% to $28.90 and

Home Depot

(HD) - Get Home Depot, Inc. Report

inched up 1% to $27.57.

-- Reported by Jeanine Poggi in New York.

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