May Department Stores second quarter profits slumped by 18 per cent as the company battled with higher costs and sluggish sales.

Net income fell to $111m from $135m a year earlier. Sales in the quarter, which ended August 4, rose 1.6 per cent, to $3.17bn from $3.12bn, the company said today.

May, the first big retailer to report results in the fiscal quarter, said comp sales fell 3.1 per cent. The retailer also spent more on advertising, payroll, and employee benefits, and had costs related to last year's purchase of David's Bridal.

Earnings per share fell for the fourth time in five quarters as consumers increased spending at discount chains such as Wal-Mart Stores Inc. Shoppers are being cautious because of job cuts and declines in the stock market, analysts have said.

Selling, general and administrative costs rose to 22.6 per cent of sales from 21.4 per cent. Interest expenses rose 8.5 per cent, to $89m.

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