U.S. retailers reported disappointing sales declines for July, suggesting shoppers are still searching for bargains and basics in the downturn.

July's results mark the 11th consecutive month of falling sales at stores open for at least one year, a measure known as same-store sales.

A few chains, including Macy's Inc , gave upbeat profit forecasts even though sales fell, as they discounted less merchandise and cut costs and margins improved.

Rising unemployment, cool weather and a lack of tax-free holidays like those held last year kept shoppers at home or buying just what they needed last month, rather than stocking up heavily on back-to-school items.

Really, July is going to be very weak, either the worst month in 2009 or the second weakest. It looks pretty bad, said Jharonne Martis, senior research analyst at Thomson Reuters. The true month to watch will be September because it will mark the first month that started the streak of negative same-store sales in 2008.

The biggest decline came from teen apparel retailer Abercrombie & Fitch Co , whose July same-store sales fell 28 percent. Still, that was only slightly worse than the 26.9 percent decline analysts had expected, helping to send Abercrombie shares up 5.8 percent.

Monthly retail sales reports have been less of a barometer of the overall economy since Wal-Mart Stores Inc , the No. 1 retailer, stopped disclosing its data earlier this year.

Wal-Mart is really, truly the one retailer that is stealing most of the market share from the other discounters and the other retailers, said Martis.

Lower gasoline prices may have spurred some consumers to spend, but the price decline crimped sales at chains that sell gas, such as Costco Wholesale Corp and BJ's Wholesale Club Inc . Same-store sales fell more than expected at both wholesale club chains.

RAISING EXPECTATIONS

Wal-Mart's smaller rival Target Corp saw same-store sales fall a steeper-than-anticipated 6.5 percent. It expects August same-store sales to be in line with its second-quarter trends, which was down a little more than 6 percent.

Dollar Tree Inc's second-quarter sales rose more than expected. But Big Lots Inc , which also caters to bargain hunters, said sales fell more than analysts forecast.

TJX Cos Inc , which has attracted more customers to its off-price T.J. Maxx and Marshalls chains, reported a better-than-expected 4 percent rise in July same-store sales.

TJX now expects second-quarter earnings per share from continuing operations to be near the high end of its previous forecast of 56 cents to 59 cents. Analysts, on average, expect 59 cents, according to Reuters Estimates.

Gap Inc's July same-store sales fell 8 percent, a half point better than expected. Women's apparel sold better than men's at its Gap, Banana Republic and Old Navy chains. Gap expects to earn 30 cents to 32 cents per share in the second quarter, driven by improved margins. Analysts expect 28 cents per share. Gap shares jumped 8 percent.

Even though J.C. Penney Co Inc's sales fell more than anticipated, it raised its earnings guidance as margins and operating expenses improved.

Sales at American Eagle Outfitters Inc and Aeropostale Inc missed expectations, but both teen retailers raised their second-quarter forecasts.

Skate- and snow-boarding inspired retailer Zumiez Inc posted a narrower-than-expected 16.8 percent drop in July same-store sales.

Caris raised its rating on Zumiez to average from below average and its shares soared 12.5 percent.

We continue to believe Zumiez is a growth story and feel that once the economy begins to rebound, there are still sufficient opportunities for growth, Jennifer Black & Associates said in a note to clients.

Buckle Inc , one of few chains that has continued to post gains in same-store sales amid the downturn, saw sales rise less than expected and its shares plunged. Limited Brands Inc , however, saw same-store sales fall less than expected and its shares soared 14 percent.

Children's Place , which caters to the younger set, topped sales expectations with a 4 percent decline and forecast a slighter narrower quarterly loss than Wall Street expected.

The Standard & Poor's Retail Index <.RLX> soared 10 percent in July, outpacing a 7.4 percent rise in the broader S&P 500 <.SPX>.

(Reporting by Jessica Wohl and Ben Klayman in Chicago, Aarthi Sivaraman in Seattle, Nicole Maestri in San Francisco, Martinne Geller and Chavon Sutton in New York; Editing by Ted Kerr and John Wallace)

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