Frugal-minded shoppers spent their tax rebate checks at discount merchants last month, boosting sales at some of the country's largest chains. But they stayed away from higher-priced department and specialty stores, causing sales to fall by double-digits at Nordstrom and American Eagle.

It was a sign that consumers are confining themselves to spending on the basics, and even then, they are looking for bargains, retail experts said. It also suggests that the back-to-school shopping season will be weak and feature deep discounts right from the start.

"The price-cutting will be as aggressive as we've ever seen it. It's already starting," said George Whalin, president of Retail Management Consultants in San Marcos, Calif. "This week, Office Depot was running ads saying, 'This is the official start of back to school,' and it's early July!"

Given sky-high prices for gasoline and rising food costs, no one in the retail trade was expecting June to be a blockbuster month. That said, merchants were hoping for a "stimulus" effect from tax rebates — and chains such as Wal-Mart, Costco and B.J. Wholesale Club, which all sell cheap gas, got exactly that.

"Wal-Mart's number was pretty amazing," Whalin said, referring to the company's 6.4 percent increase in sales at stores open at least a year.

Because Wal-Mart is the nation's largest retailer, its strong showing brought up the industry's overall results, translating into a June increase of 4.3 percent, according to figures released yesterday by the International Council of Shopping Centers. Without Wal-Mart, industry sales rose only 1.9 percent.

Warehouse clubs turned in a strong showing as well. Costco posted a 9 percent increase in June same-store sales.

"Costco has just been cooking along," said Whalin. "No matter what the economy, they seem to go up every month. This is a company on a tear."

However, the glass turned out to be half empty for many department stores and apparel merchants, which are predominantly located in shopping malls where rents are higher.

Seattle-based Nordstrom, which opened a Honolulu store in April, experienced an eye-popping 18.6 percent drop in June sales. It blamed that, in part, on a decision to shift its half-yearly sale for women and children from June to May. Sales at J.C. Penney fell 2.4 percent.

Retail consultant Kurt Barnard says department stores have no one to blame but themselves.

"It's very simple. Department stores are risk-averse. They treat the consumer to the same things they have treated them to in past months and years. That's particularly unfortunate because in a down economy, consumers must be given an incentive to break through the barrier that dictates 'Don't spend.' The only way to accomplish that is to bring to the consumer a merchandise panorama that is exciting, interesting and maybe risky."

Another big-time loser last month was Gap Inc., which has been searching for the right fashion formula. Sales at domestic Gap stores fell 5 percent, and at its Old Navy discount chain were down 10 percent. Banana Republic, which has tried for a trendier look, also saw disappointing numbers, with sales off 5 percent.