By Anne D'Innocenzio
The Associated Press

NEW YORK - A stock market rebound and the end of the U.S.-led war in Iraq failed to give retailers a lift in May, resulting in modest sales gains for the month. Rainy and unseasonably cool weather in some regions and a weak job market continued to dampen spending.

While the retail results announced Thursday were slightly better than the pace seen since August, many Wall Street analysts still believe that a consumer spending recovery is on shaky ground.

"Spending is still anemic," Todd Slater, an analyst at Lazard Freres Inc., said.

Wal-Mart Stores Inc., the world's largest retailer, reported a small sales gain that was a bit below Wall Street expectations. Apparel stores for the most part reported sluggish sales, with a few exceptions such as Gap Inc., which beat expectations.

The results at department stores and apparel retailers continued to be weak but in some cases better than expected.

Cincinnati's Federated Department Stores said sales at stores open at least a year - known as same-store sales and considered the best indicator of a retailer's health - fell 0.8 percent, slightly better than the 2 to 3 percent drop the company had forecast. Total sales were $1.14 billion for the month.

Dayton-based Elder-Beerman, in talks to be acquired, reported a marginal May increase in same-store sales of 1.5 percent. But total store sales fell 0.3 percent to $42.6 million versus the same period last year.

Sears, Roebuck & Co., boosted by strong sales of its home appliance and lawn and garden business, posted a 1.9 percent decrease in same-store sales, though analysts surveyed by Thomson First Call expected a 5.3 percent decline.

J.C. Penney Co. Inc. said that same-store sales were up 3.2 percent, above the 2.3 percent gain that analysts expected.

Meanwhile, Gap, which is in the midst of a turnaround, said same-store sales rose 10 percent. Thomson First Call anticipated a 6.8 percent increase.

"While Gap's men's business was weaker than expected, women's summer product performed well, with our advertised women's tunics continuing to be a summer fashion standout," said Sabrina Simmons, senior vice president, treasury and investor relations.

Bank of Tokyo-Mitsubishi Ltd.'s sales tally of 76 stores open at least a year was up 2 percent, compared with a 3.5 percent gain in the year-ago period. That was higher than the 1.5 percent anticipated and a bit above the average 1.5 percent pace seen since last August.

"It is a little better than expected, but we still haven't broken out of a sluggish pace yet," said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi.

While rainy weather generally hurt sales throughout the month, it sparked sales over the Memorial Day weekend for many merchants, driving consumers to malls for some relief, Niemira said.

"There's a lack of fashion excitement. The weather has been uncooperative," said Kurt Barnard, president of Barnard's Retail Consulting Group, based in Montclair, N.J. "But the big concern is high unemployment."

Also Thursday:

• The Labor Department reported Thursday that the number of American workers filing new claims for jobless benefits rose to a five-week high last week.

The Labor Department said new applications for unemployment insurance increased by a seasonally adjusted 16,000 to 442,000 for the week ending May 31. The increase pushed claims to their highest level since April 26.

• Orders to U.S. factories slipped 2.9 percent in April from March, the largest decline in 17 months. The decline, reported by the Commerce Department, was steeper than the 1.8 percent drop economists were forecasting.

Manufacturing, which has reduced jobs and cut production, has been a major trouble area for the economy.

Analysts believe that consumers will only increase spending when companies begin to step up investments, including hiring.

In a telling sign, Wal-Mart speculated in its pre-recorded call that consumers were having "liquidity" issues because spending spiked only after consumers received their bi-weekly paychecks, but the pace slackened in between pay periods.

Same-store sales

May same-store sales reported by the five largest retailers (sales compare the current year's sales with those of the previous year at stores open at least a year):

• Wal-Mart Stores, up 2.1 percent.

• Target, up 0.7 percent.

• Kmart, emerged from bankruptcy in May and will now be filing summary quarterly reports that will include same-store sales information. The next report will be released by June 16.

• J.C. Penney, up 3.2 percent (J.C. Penney stores only).

• Sears, Roebuck & Co., down 1.9 percent (domestic stores only).

Enquirer reporter Randy Tucker contributed to this report.