Wal-Mart Stores Inc. on Tuesday said first-quarter profits rose 6.9 percent, but the world's largest retailer offered a guarded outlook as consumers wrestle with higher energy and food costs.Higher sales helped Wal-Mart beat Wall Street's expectations, which President and CEO Lee Scott attributed to strategy begun two years ago to make inventory management more efficient and improve customer service. "There are still uncertainties during the rest of the year," Scott said in a recorded call for investors. "The economy is playing a critical factor in 2008."

Scott and other executives said Wal-Mart is in a good position to meet customers' needs in the down economy and later, when there is a rebound.

Still, shares fell 80 cents to $57.22 at the open of trade.



Wal-Mart earned $3.02 billion, or 76 cents per share, in the three months ended April 30, up from $2.83 billion, or 68 cents per share, a year earlier.

Analysts polled by Thomson Financial had projected earnings of 75 cents per share.

Wal-Mart Chief Financial Officer Tom Schoewe said the company expects second-quarter sales in stores open at least a year to be between flat and up 2 percent. He said the company expects to earn between 78 cents per share and 81 cents per share. Wal-Mart has not been able to gauge how much of an impact the federal tax rebate checks will have on shoppers, Schoewe said.

"Higher transportation costs will remain a potential headwind for us the rest of the year," Schoewe said.

The company had overall revenue of $95.30 billion, up 10.3 percent from $86.41 billion in the prior year. Net sales excluding membership fees rose to $94.1 billion from $85.4 billion a year ago.

Analysts projected revenue of $93.47 billion for the quarter.

Without fuel, same-store sales for the first quarter were up 2.9 percent at Wal-Mart's domestic properties, rising 2.7 percent in the Wal-Mart Stores division and 3.6 percent at Sam's Clubs.

Wal-Mart's corporate expenses are up because of a program to improve information systems for finance, merchandising and human resources.

Eduardo Castro-Wright, CEO of Wal-Mart's U.S. division, said that credit as a form of payment has declined since the third quarter of last year.

"The paycheck cycle is more pronounced as things get tighter for the customer at the end of the month," Castro-Wright said.

But he said that once customers have their basic needs covered, they are still making discretionary purchases, especially on entertainment items for the home.

"Customers do shop for things they want, not just what they need," he said.

In a research note, analyst Adrianne Shapira of Goldman Sachs said Wal-Mart's first-quarter numbers "demonstrated that it is best positioned to weather today's challenging environment," considering increases in customer visits and how much shoppers are spending each trip.

Shapira said Wal-Mart's conservative projection for the second quarter could change because the company has not factored in potential benefits from government economic stimulus plan checks arriving in the mail now.

"We believe setting an achievable and potentially beatable bar in today's tough environment is the prudent way to provide guidance," Shapira wrote.

Wal-Mart's results came as the Commerce Department reported that retail sales fell 0.2 percent in April, with consumers hurt by high gasoline prices and a down economy.

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