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The gain was a drop from June's 4.2-percent increase but still within the 2 percent-3 percent range ICSC had predicted, the report said.

Retail giant Wal-Mart's market share improved on the month with a slight acceleration of more than its 1.2 percent year-to-date trend, rising 1.4 percent in July, the report said.

It was a month "dominated by clearance sales and summer merchandise at sharp discounts", ICSC said.

Demand for back-to-school items took hold in the month but is expected to gain "dramatically" in August, the report said.

In July, value and conveniences retail stores did better than the industry average with sales at wholesale clubs rising 9.5 percent in the month -- or 5.2 percent if gas sales are excluded from the figure, the report said.

Among retailers, apparel specialty sales, down 5.5 percent in the month, and department store sales, down 5.7 percent, "continue to struggle", the report said.

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