By Anne D'Innocenzio
The Associated Press

NEW YORK - Despite lackluster sales this summer, Wal-Mart Stores Inc. and Target Corp. offered upbeat outlooks on consumer spending Thursday as they reported higher second-quarter results.

Wal-Mart's profit increased 8.6 percent and beat Wall Street projections by a penny per share. The company also raised its earnings forecast for the year, and said sales should pick up this fall. Target saw its profits almost quadruple because of a one-time gain from the sale of its Marshall Field's department stores.

"Although I am concerned about high gasoline prices, I continue to believe that growth in employment and real income will lessen the impact," said Lee Scott, Wal-Mart's president and chief executive. "I still feel good about the year."

Doug Scovanner, Target's chief financial officer, said, "Our momentum remains strong."

The nation's leading retailers appeared to embrace the Federal Reserve's optimism that the recent economic slowdown is temporary and the retail sector and economy will bounce back. Providing more evidence was a Commerce Department report released Thursday showing a 0.7 percent increase in retail sales in July, following a 0.5 percent drop in June. June's decline also was revised from the 1.1 percent decrease the government originally reported.

But some analysts remain cautious, noting that the consumer spending picture is still murky.

"The energy story hasn't fully played out, and that is what worries me," said Michael P. Niemira, chief economist at The International Council of Shopping Centers. "We haven't seen any kind of reversal on oil prices."

Rising energy prices have cut into consumers' budgets. If they remain at all-time highs, that could further threaten job growth, as companies become more nervous about increasing their payrolls.

Wal-Mart Stores

The world's largest retailer earned $2.65 billion, or 62 cents per share, in the three months ended July 31, up from $2.44 billion, or 56 cents per share, in the year-ago period.

Analysts surveyed by Thomson First Call expected 61 cents per share.

The Bentonville, Ark.-based retailer reported a 4.1 percent increase in sales at stores open at least a year. Same-store sales are considered the best indicator of a retailer's performance.

Wal-Mart's store division posted a 3.2 percent same-store sales increase, while Sam's Clubs had an 8.8 percent gain.

For the first half, Wal-Mart earned $4.8 billion, or $1.12 per share, up from $4.31 billion, or 98 cents per share. Total sales rose to $135.91 billion from $120.45 billion.

Target

Second-quarter earnings at the discount retailer almost quadrupled thanks to a one-time gain from the sale of its Marshall Field's department stores to The May Department Store Co.

The Minneapolis-based chain reported net income of $1.42 billion, or $1.54 per share, up from $358 million, or 39 cents per share, in the same quarter last year.

Analysts had expected earnings of 47 cents per share.

With the sale of Marshall Field's and the pending sale of Mervyn's, "the strategic direction of Target Corp. is clear," Chairman and Chief Executive Bob Ulrich said.

Earnings for the first six months were $1.85 billion, or $2.02 per share, up from $707 million, or 77 cents per share, in the first half of 2003. Revenues rose 12 percent to $20.74 billion from $18.52 billion.