NEW YORK (CNN/Money) - Wal-Mart Stores Inc.'s fiscal first-quarter profit rose from a year earlier, the world's largest retailer said Tuesday, beating Wall Street forecasts as consumers continued bargain hunting at the discount chain.

Separately, J.C. Penney Co. (JCP: up $1.37 to $24.57, Research, Estimates) also reported a higher profit that beat estimates and said its turnaround plan is on track. Its shares were up more than 5 percent Tuesday afternoon.

Wal-Mart, which became the world's biggest company last year with about $219 billion in sales, said earnings for the quarter ended April 30 increased to $1.7 billion, or 37 cents a share, from $1.4 billion, or 31 cents a share, a year earlier. Analysts polled by earnings tracker First Call anticipated a 36-cent-a-share profit.

First-quarter sales increased 14 percent to $55 billion from $48 billion. Sales at stores open at least a year, a key gauge known as same-store sales, increased 8.1 percent.

Wal-Mart also said Tuesday it remains comfortable with its full-year earnings guidance of $1.74 to $1.76 a share and second quarter earnings of 43 cents to 44 cents a share, both within the range of analysts' estimates.

The company said it expects a mid-single-digit same-store sales increase for May and a 5 percent to 7 percent increase for the second quarter.

Shares of Wal-Mart (WMT: up $2.45 to $57.49, Research, Estimates), a component of the Dow Jones industrial average, jumped almost 5 percent in Tuesday afternoon trading.

"We are confident our earnings momentum will continue and look forward to reporting another record year in sales and earnings," Wal-Mart CEO Lee Scott said.

Wal-Mart, Target Corp. (TGT: up $1.09 to $42.67, Research, Estimates) and other discount chains have been steadily taking market share from typically higher-priced traditional department stores and specialty chains in the last few years as the sluggish economy and rising unemployment turned consumers more cautious.

Wal-Mart is by far the low-price leader, thanks to its extremely efficient distribution and back-end systems that allow products to be restocked almost immediately after being sold from store shelves. Such efficiency has enabled the Bentonville, Ark.-based company to maintain margins and keep prices lower than competitors.

However, some have wondered whether Wal-Mart's explosive growth has pushed its market value out of whack. The stock is trading at about 37 times projected 2003 earnings. That's higher than its nearest discount competitor, Target, which trades at 27 times earnings, or Family Dollar, which trades at 31 times, and B.J.'s Wholesale, which trades at 23 times earnings.

"It's always been a high-multiple stock among the retailers based on the reality of terrific business performance," said Douglas Altabef, senior managing director at Matrix Asset Advisors, a value management firm. "Wal-Mart has many times in the last 15 years been a lousy investment possibility because it's priced so high. Our thinking is they've got to always be right."

And the company's April same-store sales increased just 3.3 percent, about half the increase it logged a year earlier. The company, as did most retailers reporting April sales last week, blamed a calendar shift that bumped the Easter holiday into March, stealing sales from April.

Wal-Mart also noted in a pre-recorded message following its earnings report Tuesday that the economy is recovering more slowly than anticipated and that consumers remain cautious, going for lower opening price points at the stores.

"I think the whole retail area is fairly pricey right now," Altabef said. "I don't' think that retail is going to be where the action is when the economy recovers. Why? Because consumers never left the economy. Retail is not a sector that really suffered greatly and is now due for a big pop."

But so far, Wal-Mart has been right. The company continues to find new avenues for expansion, particularly overseas and domestically, with its Neighborhood Market food business. Of the two, several analysts said they see food as one of Wal-Mart's biggest growth drivers in 2002 and beyond.

On Tuesday, the company said food sales increased 30 percent in the first quarter from a year earlier, a sharp increase from the low-double-digit year-to-year growth it posted in the first quarter of 2001.

Meanwhile, Wal-Mart International sales jumped 17.8 percent from a year earlier.

"I think if you take care of the customer, they are going to take care of you no matter what the economy is doing," Wal-Mart spokesman Tom Williams said last week in response to questions about possible overexpansion.

"I think Wal-Mart is in a very solid controlled growth period right now. I would take exception to any comments that they've got too much on their plate," said Steve Roorda, a retail analyst at American Express.

Kurt Barnard, president of Barnard's Retail Consulting Group, believes Wal-Mart's overall execution is strong enough to keep it growing.

"Its formula is essentially one that appeals to just about everybody, and that takes advantage of a fundamental need -- pay less than you have to elsewhere," Barnard said. "It is a totally irresistible formula that, so long as there is such a thing as buying and selling, will not fail."

Williams said the company plans to add about 46 million square feet of new retail space, the largest expansion in company history.

On Tuesday Wal-Mart said its company-wide gross margins grew 42 basis points from a year earlier on inventory that grew just over 3 percent.

Additionally, interest expense declined 22 percent from a year earlier.

Philip Emma, an analyst at Moody's Investor Service who follows Wal-Mart, said the chain's debt rating remains strong.

"Competitively they're obviously at the top of the game," said Emma, who rates the company's debt an Aa2, one of Moody's highest ratings.

Wal-Mart discount stores posted a 15.2 percent sales increase and the Sam's Club wholesale operation posted an 11.6 percent gain.

Separately Tuesday, J.C. Penney Co. (JCP: up $1.37 to $24.57, Research, Estimates) posted sharply higher first-quarter results, beating Wall Street estimates as the department store chain continues its efforts at turning the business around.

For the quarter ended April 27, Penney reported earnings excluding items of $86 million, or 29 cents a share, up from $41 million, or 11 cents, a year earlier. That beats analysts' consensus forecast of 25 cents.

First-quarter sales rose 2.7 percent to $7.7 billion from $7.5 billion. Same-store sales at J.C. Penney stores increased 8 percent in the quarter, while the Eckerd drugstore division posted a 7.6 percent same-store increase.