May brought lackluster sales results for retailers, with discount chains turning in the strongest performance, as consumers again showed their cautious side in a fitful economic recovery.

Based on 28 retailers tracked by Thomson Reuters, sales at stores open at least a year rose 2.5 percent, just shy of the 2.6 percent that Wall Street predicted. The Standard & Poor's Retail Index <.RLX> was down 0.5 percent, helping drag down the wider market.

These results are disappointing, especially considering where the estimates have come down since the earnings calls from retailers in the latter part of May, said Wall Street Strategies analyst Brian Sozzi.

Sozzi did not rule out the idea of a double-dip recession as California, one of the U.S. states that led the start of the latest downturn, was showing weakness again.

Retailers were also cautious, saying consumer sentiment could remain erratic.

We will continue to experience volatility in the pace of economic recovery, Target Corp Chief Executive Officer Gregg Steinhafel said in a statement. The company reported May sales just above analysts' expectations and forecast a low single-digit percentage rise for June. Target shares were down 0.2 percent.

However, new data on jobless claims and the services sector on Thursday showed the U.S. labor market was improving, potentially lifting demand in months to come.

As we are slowly climbing out of a recession ... we're kind of up and down a bit, said Laura Gurski, head of A.T. Kearney's global consumer and retail practice. The positive jobs report will be a bright spot ... Job improvement translates into an overall level of consumer confidence.

A BRIGHTER JUNE?

Factors that influenced May shopping included a Memorial Day holiday on the last weekend of the month. Analysts said that probably dragged sales down by a low- to mid-single-digit percentage rate, with more shopping pushed into June.

Cooler weather everywhere but the Northeast, as well as heavier rain in the Northwest, hurt sales of summer apparel, analysts said.

Some retailers pointed to stronger demand in late May, suggesting June results could be better. The International Council of Shopping Centers expects June same-store sales to rise about 3 percent.

The thing we were looking for was positive commentary from any of the retailers seeing a pickup in business ahead of Memorial Day after the slow start to the month, and it looks like several retailers were able to make those kind of comments, said Ken Perkins, president of Retail Metrics.

However, analysts agreed the next key month will be July, when the back-to-school shopping season kicks off.

There are some symptoms of a mixed environment, but you don't want to read too much into that because May is such an insignificant month with respect to retail, said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors.

DISCOUNTERS AMONG TOP PERFORMERS

By segment, discount chain sales were up 5.3 percent, slightly below Wall Street forecasts. Department stores saw a 1.2 percent increase, while teen apparel sales fell 2.7 percent.

BJ's Wholesale Club Inc's 11.3 percent increase in same-store sales topped expectations for a 6.6 percent gain. TJX Companies Inc also posted a better-than-expected gain and cited substantially more demand in late May with warmer weather.

Limited Brands Inc said May same-store sales rose 5 percent, well ahead of the 2.1 percent gain analysts had forecast. It sees June same-store sales to be flat to up in the low single-digits.

Other retailers reporting better-than-expected May same-store sales included Macy's Inc , Aeropostale Inc , Gap Inc , Dillards Inc , Kohl's Corp and Saks Inc .

Costco Wholesale Corp fell short with a 9 percent gain for the month, compared with the 9.7 percent increase analysts polled by Thomson Reuters had expected. The warehouse operator's shares fell 2.7 percent.

Others with sales below Wall Street estimates include Abercrombie & Fitch , Nordstrom Inc , JC Penney Co Inc and Rite Aid Corp .

(Additional reporting by Phil Wahba, Martinne Geller, Dhanya Skariachan, Helen Chernikoff and Abhishek Takle; Editing by Michele Gershberg and Lisa Von Ahn)

S&P California Retail