By Brad Dorfman

CHICAGO (Reuters) - U.S. retailers are likely to get an "incomplete" mark for the key back-to-school season when they report August sales this week, as a later Labor Day is expected to pull some sales into September, pressuring August results.

Retailers that report August sales -- a group that does not include industry giant Wal-Mart Stores Inc -- are expected, on average, to post a decline of 3.9 percent in sales at stores open at least a year, according to Thomson Reuters data.

Investors are looking for signs that consumers, who account for about 70 percent of U.S. economic activity, are loosening their purse strings after pulling back during the worst recession since the Great Depression.

"It's going to be watched very closely," Ken Perkins, president of Retail Metrics Inc, said of August sales data. "Did anyone go out and start picking up their discretionary spending here?"

Retail stocks have rallied sharply since early March, helped by cost cuts that helped offset falling sales. The Standard & Poor's Retail index is up more than 56 percent since early March, though some analysts say retailers will need to start showing sales improvement for the stocks to rally much further.

WHEN IS LABOR DAY?

The sales view is likely to be distorted by the shift of Labor Day -- which falls on the first Monday in September -- to September 7 in 2009 from September 1 in 2008. That shift means seven more pre-Labor Day selling days, including the entire holiday weekend, will be in the September sales reporting month this year. Last year, the Saturday of Labor Day weekend fell in August.

"A lot of people traditionally wait for that Labor Day weekend to do their back-to-school shopping," Perkins said, estimating that a couple of percentage points of sales growth could be lost this August.

But some of the impact from the later Labor Day will be muted by a shift of some states' sales tax "holidays" into August from July, analysts said.

Overall, a better look at the back-to-school season -- often seen as a harbinger of the Christmas holiday selling season -- will be seen by combining August and September sales this year.

"There are some tricks of the calendar this year, with variations in tax holidays and a delayed back-to-school season, so there may be volatility in August sales and September" sales, Lawrence Creatura, a portfolio manager at Federated Investors, said.

Still, there are some signs of brighter consumer sentiment and economic improvement, which could help sales going forward. The U.S. economy shrank less than expected in the second quarter and fewer workers filed new claims for jobless benefits last week, among the latest signs that the economy could be shrugging off the recession. [nN27303398]

"If there is an uptick, then the holiday season could have a chance at a modest season, not just an absolutely terrible one like (retailers) had last year," Perkins said.

Most retailers have seen sales hammered by the recession, though discounters and other stores seen as offering value for cash-strapped consumers, such as TJX Cos Inc, have benefited.

"I can't tell you how many people I talk to who say they are doing their back-to-school shopping at Ross or T.J. Maxx," Patricia Edwards, founder and chief investment officer at Storehouse Partners, said. "It's becoming chic to save money."

Ross and TJX are both expected to post higher same-store sales in August, with all apparel retailers expected to show a 3.2 percent decline, according to Thomson Reuters data. Discount retailers are expected to show a 5.6 percent decline, while department stores are seen down 6.9 percent.

Same-store sales at teen and child apparel retailers, which are particularly affected by back-to-school sales, are expected to be down 9.5 percent.

(Reporting by Brad Dorfman; Editing by Richard Chang)