NEW YORK (CNNMoney.com) -- Wal-Mart Stores Inc. reported a 26 percent drop in quarterly profit Tuesday - its first earnings decline in more than 10 years - because of a charge for selling its German stores to a rival. The company maintained its full-year profit forecast, however.

Net income fell to $2.08 billion, or 50 cents per share, in the second quarter that ended July 31, from $2.8 billion, or 67 cents, a year earlier.

Excluding an $863 million loss on the sale of the German stores to Metro AG, earnings per share were 72 cents in the latest period, in line with the average forecast of analysts polled by Reuters Estimates.

Quarterly sales rose 11.3 percent to $84.52 billion.

Wal-Mart (Charts) shares were trading lower on the New York Stock Exchange. Shares of the company are down about 4.5 percent this year on lackluster sales growth at its stores. The stock trades at about 13.5 times analysts' profit forecasts for next year, compared with 13.6 times for rival Target Corp (Charts).

The retailer's last decline in quarterly profit came in the fourth quarter that ended Jan. 31, 1996. That had been its first drop in profit since becoming a publicly traded company in 1970.

Wal-Mart, the world's largest retailer, has been adding more upscale items, such as trendy clothing and organic food, to try to get wealthier shoppers to buy more high-margin items.

However, its core low-income shoppers who represent a majority of its customer base have been hit particularly hard by rising gasoline prices.

In a pre-recorded earnings call to discuss Wal-Mart results, Wal-Mart CEO Lee Scott said he was "disappointed with Wal-Mart's performance in the U.S."

"Some of the same issues affecting our customers - higher utility costs and gas prices - are impacting many corporations, including Wal-Mart," Scott said during the call. "Our customers in the U.S. tell us they have been conscious of gas prices every months this quarter."

As a result, Scott said Wal-Mart shoppers are reducing the number of trips to Wal-Mart although that trend is being offset by growth in average ticket, for now.

"We find it encouraging that we continue to grow market share in food and consumables during this time," Scott said.

Wal-Mart said it was experiencing the same shopping pattern at its Sam's Club warehouse stores.

Sales at Wal-Mart's U.S. stores open at least a year - a key retail measure known as same-store sales - rose 1.5 percent in the quarter and 2.6 percent for Sam's Club stores.

Wal-Mart said higher maintenance costs associated with its ongoing store remodeling program for some of its U.S. stores, combined with higher utility, and advertising costs related to back-to-school spending, also pressured expenses during the quarter.

"There are two good things about this quarter for Wal-Mart: First, Wal-Mart didn't miss estimates. Second, it didn't change its full-year guidance," analyst Mark Husson said.

"The highlight was that Wal-Mart's gross margins before distribution costs was up nicely, labor costs were lower and Wal-Mart is growing inventory at half the cost soft sales. All this is great for them but probably not for Wal-Mart suppliers," Husson said.

But from here on, the challenge for Wal-Mart, he says, is that the retailer's full-year results are heavily dependent on the fourth quarter.

The fourth quarter is a critical period for retailer since it includes the November-December holiday shopping months that can account for more than 50 percent of merchants' annual profits and sales.

Husson said Wal-Mart isn't expecting consumers to shop aggressively over the holidays. Rather, Wal-Mart's mostly paycheck-to-paycheck shoppers will primarily target the big events, like back-to-school and Christmas sales.

Moreover, Wal-Mart would've remodeled 1,800 of its U.S. stores prior to the holidays. "That together with new fall fashions should help to create the right store environment to support holiday floorsets," Husson said.

For its third quarter, Wal-Mart said it expects earnings per share from continuing operations to be 59 to 63 cents.

For the full year, it forecast earnings per share of $2.88 to $2.95.

The company expects third-quarter same-store sales to increase 2 to 4 percent.

Analysts, on average, currently expects Wal-Mart to earn 63 a cents for the third quarter and $2.92 a share for the full year, according to First Call.

During the quarter, the company opened four new discount stores, 35 new Supercenter stores, three new neighborhood market locations and 42 new international stores. In total, the company currently operates 3,918 domestic locations and 2,710 locations internationally.

--from staff and wire reports

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