Aug. 6 (Bloomberg) -- Kohl’s Corp., Limited Brands Inc. and Ross Stores Inc. reported July sales that topped analysts’ estimates, sending the shares higher on signs that the retail industry may start to recover later this year.

Sales at stores open at least a year rose 0.4 percent at Kohl’s, the U.S. department-store chain. Analysts predicted a 4.3 percent drop, the average of estimates compiled by Retail Metrics Inc. Limited sales fell 7 percent, topping the average estimate for a 12 percent decline. Gap Inc. and Macy’s Inc. shares rose on better-than-estimated earnings.

The gains at Kohl’s and Ross Stores countered a 5 percent drop at 33 U.S. chains, according to the International Council of Shopping Centers. Sales in August may fall 4 percent, said Mike Niemira, the New York-based trade group’s chief economist. Sales declined 5.1 percent in June and 4.6 percent in May.

“Although July doesn’t look much different than June or even May, I think it will probably mark the turn in the industry towards better performance from here on out,” Niemira said today in a telephone interview.

Kohl’s, based in Menomonee Falls, Wisconsin, rose $1.51, or 3.1 percent, to $51.02 at 4:15 p.m. in New York Stock Exchange composite trading. Pleasanton, California-based Ross climbed $1.41, or 3.3 percent to $43.97. Limited, based in Columbus, Ohio, rose $1.65, or 13 percent, to $14.39, the largest one-day gain since Oct. 28.

‘Easing Up’

Ross Stores July sales climbed 4 percent, topping the average estimate of 0.7 percent. The retailer sells designer clothing and shoes for 20 percent to 60 percent less than department and specialty stores, helping it draw shoppers seeking bargains. Kohl’s sells apparel, shoes and housewares targeted to middle-income customers.

“The results reported by retailers provide some signs that shoppers are easing up on their cutbacks,” said Frank Badillo, an economist at Columbus, Ohio-based consulting firm Retail Forward.

Macy’s gained in New York Stock Exchange trading after saying that it earned 15 cents to 17 cents a share in the second quarter, before some items. Analysts projected per-share profit of 6 cents. Jim Sluzewski, a spokesman for Macy’s, said the retailer beat estimates on “a combination of factors” that it will discuss when it releases its earnings report on Aug. 12. Macy’s same-store sales declined 10.7 percent in July.

Shares of Macy’s rose 79 cents, or 5.6 percent, to $15.01. Gap climbed $1.37, or 8.2 percent, to $18.14, the largest one- day gain since Nov. 21.

Beating Estimates

Gap said second-quarter profit was probably 30 cents to 32 cents a share in the three months ended Aug. 1. Analysts predicted earnings per share of 27 cents, the average of 22 estimates compiled by Bloomberg.

Improvements in gross margin and expense reductions contributed to retailers’ ability to report second-quarter profit above estimates, according to Liz Dunn, an analyst at Thomas Weisel Partners LLC in New York.

“This is encouraging heading into the back half as sales and margin comparisons to last year are even easier,” Dunn said.

‘Must Have’

July accounts for about 30 percent to 35 percent of second- quarter retail sales and marks the beginning of the back-to- school season as retailers introduce new merchandise, according to Betty Chen, an analyst at Wedbush Morgan Securities in San Francisco.

This back-to-school season, “there are key ‘must have’ fashion items (boyfriend jeans, blazers, plaid shirts) that the teen customer will seek out once the school season starts, which could result in improved sales trends” in the second half of 2009, Christine Chen, an analyst with Needham & Co. in San Francisco, wrote in an Aug. 3 report.

Sales at U.S. stores open at least a year fell 8 percent at Gap, operator of the Old Navy and Banana Republic chains, compared with an 8.3 percent average of analysts’ estimates compiled by Retail Metrics Inc. Comparable-store sales at Abercrombie & Fitch Co. dropped 28 percent, a bigger decline than the 27 percent projection. American Eagle Outfitters Inc. fell 11 percent, compared with the 10 percent average estimate.

Cutting Inventory

Many chains have reduced inventory throughout the last six months, leaving less discounted clearance merchandise to draw consumers, according to Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics.

“Clearance tables used to be relatively full and well- stocked each month as retailers tried to clear out merchandise that didn’t sell,” Perkins said today in a telephone interview. “If there is any uptick here in terms of consumer spending in the fall and into the holiday shopping season, retailers may lose sales because they just don’t have the merchandise on the shelves.”

Confidence among U.S. consumers fell more than forecast in July. The Conference Board’s confidence index dropped to 46.6, a second consecutive decline, following a reading of 49.3 in June, a report from the New York-based group showed on July 28. The figure reached a record low of 25.3 in February.

The U.S. has lost 6.5 million jobs since the recession began in December 2007, the biggest decrease of any economic slump since the Great Depression.

Companies cut another 371,000 jobs in July, indicating rising unemployment will erode spending, figures from ADP Employer Services showed yesterday. The report from the world’s largest payroll processor was projected to show a 350,000 drop in payrolls, according to the median estimate in a Bloomberg survey.

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.

Last Updated: August 6, 2009 16:36 EDT