NEW YORK -- The outlook for the back-to-school shopping season seems grim.

July sales reports from retailers show an increasing shift toward buying only necessities at discounters and away from discretionary spending on clothing.

Wal-Mart, the world's largest retailer, and Costco posted solid gains, but Wal-Mart's July results fell slightly short of Wall Street forecasts. And the company projects that sales will slow this month as the benefits from the stimulus checks dry up.

Many mall-based apparel stores including Limited Brands and Gap reported deep declines, with shoppers buying only what they need. Luxury stores also struggled with weaker sales as even affluent shoppers pull back.

The International Council of Shopping Centers-UBS sales tally of 38 stores reported a 2.6 percent increase in July same-store sales. Those are sales at stores open at least a year, a key indicator of a retailer's health.