Consumers, armed with government rebate checks, still have eyes only for heavily discounted items and necessities, and the critical back-to-school season is looking like another difficult period for the nation's retailers.

U.S. retailers on Thursday reported better-than-expected June sales results, providing some relief to merchants, particularly discounters. In fact, Wal-Mart raised its earnings outlook based on robust results. But even the extra cash from the government's stimulus checks failed to spur major splurges, leaving experts to predict a return to overall sluggish sales when the last of the checks are mailed this week.

Parents are expected to stick to the basics like notebooks and jeans. That may mean no $100 suede backpacks, fewer new tops for the kids and $2 pens might seem like too big a splurge. More children may have to wear hand-me downs passed down from their older siblings.

"I don't think people are looking for the luxuries - expensive pens or fancy new computers," said Janet Hoffman, managing partner of the North American retail practice of Accenture."They are going for the basics and they are on a treasure hunt for value."

Retailers are responding with enticements to try to grab limited dollars.

Starting this weekend, Wal-Mart Stores Inc., the world's largest retailer, is rolling out a new round of aggressive discounts on back-to-school and products across the store. It hopes to grab shoppers who want to consolidate their trips to save on gasoline.

"Shoppers are going to do the math on the whole picture. They are going to look at supplies, electronics and apparel in the entire basket," said Melissa O'Brien, a company spokeswoman.

Office supply chain Staples Inc.'s vice chairman and chief financial officer John J. Mahoney said that its back-to-school campaign focuses more on price than in past years. Shoppers, he said, are being "more careful" with nonessentials like cool-looking pens, but he is hoping they'll be attracted to new doodads like magnetic wallpaper for childrens' lockers.

Late next week, J.C. Penney Co. will launch a back-to-school campaign tied to the popular '80s movie "The Breakfast Club," to highlight six new teen brands, including a dorm furnishing collection called Dorm Life and a denim-inspired collection for teen girls called Decree.

"The worst possible thing we can do is to repeat last year's stuff. There's a fine line between playing to win and playing to not lose," said Michael Boyslon, Penney's chief marketing director.

Retailers are operating in a brutal economic climate. The latest example was Wednesday's Chapter 11 filing by Steve & Barry's LLC, once considered the future of low-price fashion retailing. The privately-held chain blamed a cash crunch as a result of tighter credit markets and sluggish economic conditions. That hurt its plans to open stores and its ability to borrow money.

Analysts are closely monitoring back-to-school period, the second most important for retailers after the holiday season.

The good news is that some merchants have seen some relief from the tax rebates that consumers began receiving in May, and the residual effects could help with back-to-school spending. But many analysts believe spending will deteriorate as those benefits fade. That's because many of the financial worries - high gas and food prices, slumping housing prices and tighter credit - aren't going away any time soon.

Such strain showed up in June's monthly reports as shoppers generally continued to shy away from mall-based apparel stores like Gap Inc. and Limited Brands Inc.

The preliminary tally by UBS-International Council of Shopping Centers was that monthly sales rose 4.3 percent, beating projections for a 2 to 3 percent gain, according to Michael P. Niemira, chief economist at ICSC. But excluding Wal-Mart's robust gain, the sales tally was up 1.9 percent. That's only slightly better than the 1.1 percent average seen so far this fiscal year, which for retailers begins in February. The estimate is based on same-store sales, or sales at stores opened at least a year, and are considered a key indicator of a retailer's health

June is the second most important month in a retailer's sales calendar, is a time when merchants clear out summer goods to make room for back-to-school merchandise. The discounting is continuing into July. Banana Republic, for example, has discounts of up to 60 percent at its stores and online.

Given the climate, Niemira expects back-to-school sales, which focus on electronics, family clothing, shoes and books, to rise a modest 1 percent, the weakest performance since the same period in 2001, when it registered a 2 percent decline. He forecasts that total same-store sales will be up a modest 2.5 percent in July, August and September.

Wal-Mart reported a robust 5.8 percent gain in same-store sales, saying economic stimulus checks helped lift overall customer traffic. The results exclude fuel sales. Analysts polled by Thomson Financial expected an increase of 3.8 percent.

The discounter noted strong gains in grocery, entertainment and health and wellness items and added that warmer weather helped sales in such categories as apparel and toys. It also cited strong sales of flat-panel TVs, underscoring the trend of people staying home more.

The discounter raised its earnings outlook, but cautioned that "consumers and small business owners remain concerned about the economy, inflation and most of all, higher gas prices."

Target Corp., which has not fared as well as Wal-Mart in recent months, reported a 0.4 percent gain in same-store sales. The results were better than the 0.5 percent decline that analysts had expected.

BJ's said its June same-store sales soared 16.5 percent, topping analyst expectations, as sales of both merchandise and gasoline rose sharply. Analysts had expected a 10.9 percent gain.

Among department stores, J.C. Penney Co. posted a 2.4 percent decline in same-store sales in June, a bigger drop than the 1.1 percent decline that analysts had expected.

Upscale Nordstrom Inc. reported an 18.6 percent decline in same-store sales, matching analysts' estimates, and warned it may not meet its second-quarter earnings forecast. It blamed higher markdowns and the shift of its spring merchandise clearance sale for women and children into May

But Limited posted a 9 percent decline in same-store sales, worse than the 7.4 percent decline that analysts had expected.

Gap reported a 7 percent decline in same-store sales, though the results were better than the 11.6 percent decrease that Wall Street had expected.

Shoppers, enticed by heavy discounts and armed with rebate checks, spent freely in June, helping to lift retailers' sales. The outlook for the back-to-school season remains tough, though, as consumers confront high gas and food prices, a slumping housing market and tighter credit.

The union that represents workers who install fire sprinklers has gone on strike in the Puget Sound area.

It’s time, Cinderella — take out your glass slippers.

An unseasonably cold February meant slower than expected sales for many of the region’s top retailers.

An unseasonably cold February meant slower than expected sales for many of the region's top retailers.

Retail sales rebounded during January, after a disappointing December, as consumers redeemed holiday gift cards and went shopping for warm clothing to counter the drop in temperatures.