Feb. 19 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said fourth-quarter profit rose more than analysts estimated after it stepped up U.S. holiday discounts and boosted sales in China and Latin America.

Revenue gained 8.4 percent, and Wal-Mart rose the most since Feb. 13 in New York Stock Exchange composite trading. The retailer forecast profit in the year through January 2009 that trailed analysts' estimates by as little as 1 cent.

Wal-Mart's sales topped $100 billion for the first time after Chief Executive Officer H. Lee Scott slashed prices on groceries and household items for the holidays. Cash-strapped consumers concerned with higher gasoline prices and job losses have boosted sales at discounters.

``Nobody gets rich selling groceries, unfortunately, but I do think it's a great way to drive traffic,'' Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, said in a Bloomberg Television interview. ``If the consumer's shifting down in terms of the way they're spending their dollars, that benefits Wal-Mart.'' Sorrentino helps oversee $12 billion in assets including Wal-Mart shares.

Net income climbed 4 percent to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier, the Bentonville, Arkansas-based company said today in a statement.

Wal-Mart said it expects to earn between $3.30 and $3.43 a share for the year that ends in early 2009, less than the $3.44 estimated by analysts.

Share Performance

Wal-Mart climbed 22 cents to $49.66 at 4 p.m. The shares have increased 4.5 percent this year, compared with an 8.1 percent decrease in the Standard & Poor's 500 index and a 7 percent drop by the Dow Jones Industrial Average.

The first drop in employment in more than four years last month, declining home values and higher gasoline prices are causing Americans to limit spending.

Confidence among U.S. consumers fell more than predicted in February as expectations about inflation rose. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.6, the lowest since February 1992.

Sales at stores open at least a year at U.S. retailers climbed 0.5 percent last month, the worst January since 1970, the International Council of Shopping Centers said. While many retailers posted a decline, Wal-Mart saw a 0.5 percent gain as customers shopped at discounters.

Low-Cost Destination

While Wal-Mart has suffered because many of its customers live paycheck to paycheck, the retailer has also gained because of its appeal as a destination for cost-conscious shoppers, said David Abella, an analyst at Rochdale Investment Management in New York with $2.5 billion in assets including Wal-Mart shares.

``They are benefiting from it at the expense of competitors,'' said Abella. ``The low-price effort, which is working especially well because of the slowdown, probably helped get some market share back from Target.''

Revenue for the three months that ended Jan. 31 climbed to $107.4 billion. International sales advanced 19 percent in the quarter, led by China, Brazil and Argentina.

``Clearly our underlying operational performance exceeded the expectations we had at the beginning of the quarter,'' Chief Executive Officer H. Lee Scott said on a recorded call. The performance of the U.S. economy ``will be a critical factor'' this year, he said.

Dairy Prices

Inflation in grocery prices, particularly dairy prices, boosted sales, Chief Financial Officer Tom Schoewe said today in an interview. He declined to quantify the impact.

The average price of a gallon of milk was $3.81 last month, according to the Agriculture Department, 16 percent higher than a year earlier.

Excluding costs including a writedown at its Japan unit, Wal-Mart earned $1.04 a share. Nineteen analysts surveyed by Bloomberg projected average profit of $1.02.

The full-year profit forecast trails analysts' estimates, though ``it's been some time,'' since those have been updated, Schoewe said. He described most analysts ``in a wait-and-see mode.''

Wal-Mart's forecast ``is pretty much in line with what investors are thinking,'' Joseph Feldman, an analyst at Telsey Advisory Group in New York, said in a Bloomberg Television interview.

Before the holiday season, Wal-Mart made price cuts earlier and on 20 percent more items, part of a renewed emphasis on promoting itself as the lowest-cost destination.

Economic Stimulus

Last month, the retailer introduced its own ``economic stimulus'' package, marking down groceries, medicines, fitness equipment and electronics as much as 30 percent.

``What you saw during the fourth quarter was a far more consistent message from Wal-Mart than you've seen in the past,'' Schoewe said.

Gross margin, or sales left after subtracting the cost of goods sold, widened to 23.5 percent from 23 percent.

``Inventory is squeaky clean,'' Schoewe said. Last year, the retailer had ``way too much'' clothing and had to discount. ``We didn't need to take the markdowns this year,'' he said.

Same-store U.S. sales rose 1.7 percent companywide, excluding fuel. That represents a 1.6 percent gain at Wal- Mart's discount stores and supercenters, and a 2.5 percent increase at the Sam's Club warehouse chain.

For the year, same-store sales rose 1.4 percent, excluding fuel, the smallest gain since the company began reporting the data in 1980.

Selling Expenses

Selling, general and administrative expenses rose to 18.1 percent of sales from 17.4 percent a year earlier as Wal-Mart upgraded information systems at its headquarters and spent more on advertising, repair and maintenance.

On Feb. 7, Target Corp. said fourth-quarter same-store sales rose 0.2 percent. The Minneapolis-based retailer will issue its full profit report on Feb. 26.

Wal-Mart ``should be a primary beneficiary'' of tax-rebate checks scheduled to go out later this year, said Bernard Sosnick, an analyst at Gilford Securities Inc. in New York, in a Feb. 8 report. He recommends investors buy the shares.

For the year ended Jan. 31, 2007, groceries accounted for 31 percent of Wal-Mart's sales, according to its annual report.

(Wal-Mart executives discuss fourth-quarter earnings in a recorded call at +1-203-369-1090.)

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: February 19, 2008 16:17 EST