Consumers preferred government-sponsored incentives over retailers' continued reliance on big markdowns, helping to make July same-store-sales another washout.

Retailers weren't only competing with the continued problems of low consumer confidence and employment levels, but also had the government offering big incentives for auto and home purchases.

"That doesn't leave much left over for other purchases, especially big ones like large screen TV's," said Chris Donnelly, partner in Accenture's retail practice.

The poor July showing is also building a case for extreme caution going into Christmas. Retailers are likely ordering less, which may not mean discounts will have to be as big this holiday season. But any uptick in demand won't be met with supply.

Big names like Costco Wholesale Corp. (COST), Target Inc. (TGT), and Macy's Inc. (M) continued to miss low expectations.

Even perennial outperformer Buckle Inc. (BKE) succumbed, with a 2.8% increase of which was well below analysts' views for a 10% jump. Shares were recently down 10% at $27.84 on the news. The teen- and 20s-focused purveyor of trendy tops and edgy jeans and footwear's 22-months of double-digit growth ended in June.

But there were some upside surprises, including Gap Inc. (GPS), Limited Inc. (LTD), Zumiez Inc. (ZUMZ), TJX Inc. (TJX), and Hot Topic Inc. (HOTT), with the latter receiving a lift from Michael Jackson-related merchandise.

Tax-holiday shifts, fewer clearance options because of leaner inventories and cooler weather were among the causes of drags on the month's sales, retailers said.

But there are also no real incentives for buying, except tremendously lowered prices which can carry retailers only so far.

Discounters, which have largely been holding up amid the recession, reported largely lower results. Costco reported a 2% drop in the U.S. excluding gasoline and Target maintained its woes with a worse-than-expected 6.5% decline. Chairman and Chief Executive Gregg Steinhafel said Target was beginning to see "modestly improving risk trends" in its credit-card segment, which has struggled amid rising delinquencies and charge-offs.

Smaller Costco rival BJ's Wholesale Club Inc. (BJ) continued its recent outperformance, reporting 1.8% growth excluding gasoline, although that was lower than expected.

The worst-performing retailer was Abercrombie and Fitch, which posted another month of dour results with a 28% same-store-sales drop. That was about what analysts were expecting, according to Thomson Reuters. The company hasn't reported growth since April 2008 and is increasingly shedding its no-markdown mantra. Cheaper rival Aeropostale Inc. (ARO) maintained its recent gains with a 6% increase in July, though that missed views.

TJX Cos.' (TJX) beat views with a 4% increase in same-store sales, while Ross Stores Inc. (ROST) also bested expectations with a 4% gain.

The industry's results were only the third without Wal-Mart Stores Inc. (WMT) in 30 years. The world's largest retailer said in May it would stop giving monthly sales data, following the lead of other smaller peers in recent years. But Macy's Inc. (M) last fall began giving such data again, saying the economic turmoil warranted its investors getting a read on the company's performance more often.

Expectations for the month came in at about a 5% decline, with analysts saying consumers are continuing to trade down as unemployment and gasoline prices rise.

Department stores, for more than a year the laggard among the various retail segments, again broke the mold. Macy's 11% drop came in worse than analysts' expectations, while J.C. Penney Co. (JCP)'s 12% drop also missed the analysts' views, but was better than the company's own forecast. J.C. Penney boosted its fiscal second-quarter outlook, saying it now expects a 1-cent loss. It had forecast a loss of 8 cents to 12 cents a share.

Another department store, Nordstrom Inc. (JWN)'s same-store sales fell 6.9%, not as bad as analysts feared. But Stage Stores Inc. (SSI) missed analysts' expectations with a 12% drop.

On the apparel side, Children's Place Retail Stores Inc. (PLCE) beat expectations with a 4% decline in same-store sales, while Limited Brands Inc. (LTD) posted a 7% decrease, better than analysts had anticipated.

Gap Inc. (GPS) bested estimates with an 8% drop. The company also said it expects fiscal second-quarter earnings of 30 cents to 32 cents, above the current estimate of 28 cents from analysts surveyed by Thomson Reuters.

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com