NEW YORK (CNNMoney.com) -- Wal-Mart Stores posted a quarterly profit Thursday that beat Wall Street's expectations, but the retailer's store sales dropped during the period that included the all-important year-end holiday sales.
Wal-Mart, the world's largest retailer, said fourth-quarter sales at its stores open at least a year - a key gauge of retailers' performance known as same-store sales - fell 1.6% compared to a 2.4% increase for the same period a year ago.
For the full year, Wal-Mart (WMT, Fortune 500) said its same-store sales were flat compared to a 2.8% increase last year.
"I am disappointed that [our] U.S. comparable sales were below expectations in the quarter," Wal-Mart CEO Mike Duke said during a pre-recorded call to discuss the company's results.
"The economy is a real challenge for many of our customers," he added, warning that Wal-Mart's first-quarter sales "will be difficult" due to tougher year-over-year sales comparisons and ongoing price deflation in some of its key merchandise categories including food and electronics.
"We believe we will see improvements as the year progresses," Duke said in the call.
Wal-Mart, which averages more than 100 million shoppers to its stores every week, is often seen as a barometer of the state of consumer spending.
Therefore its sales decline will likely raise concerns that consumers still aren't shopping freely. That's a troubling sign, given that consumer spending fuels two-thirds of the nation's economic activity.
Eduardo Castro-Wright, vice chairman of Wal-Mart stores, said during the call that the same-store sales decline was fueled by a "slight drop in [customer] traffic to Wal-Mart stores in the fourth quarter" as well as a decline in the total value of purchases that customers were making at Wal-Mart.
Grocery and consumer electronics were impacted the most by price deflation while sales of health and wellness, and pharmacy products were strong, said Castro-Wright.
Wal-Mart said it expects same-store sales to be flat to "plus or minus 1%" in its first quarter.
At the company's Sam's Club division, same-store sales rose a slight 0.7% in the quarter and were up 1.4% for the full year.
Wal-Mart said it expects same-store sales at its warehouse club division to also be "flat, plus or minus 1%" in the first quarter as membership renewal rates continue to be flat.
Wal-Mart's international operations - including Brazil and China - delivered the best performance in the quarter. The company said Wal-Mart International ended fiscal year 2010 with more than $100 billion in net sales and "strong double-digit sales growth" in the fourth quarter.
The retailer said profit climbed to $4.7 billion, or $1.23 a share, during its fourth-quarter ended Jan. 31.
Excluding certain one-time charges, Wal-Mart reported earnings of $1.17 per share. Analysts polled by Thomson Reuters, who typically strip out one-time charges, were expecting a profit of $1.12 a share for the three months ended Jan. 31.
Sales at Wal-Mart increased 4.6% to $112.8 billion during the quarter. Analysts expected revenue to climb 5% to $114.4 billion.
For the full year, Wal-Mart reported an 8.8% jump in profit to $14.4 billion, and sales rose 1% to $405 billion.
The Bentonville, Ark.-based company expects to earn between 81 cents and 85 cents per share for the current quarter, while analysts expect the company to earn 85 cents per share.
For the full fiscal 2011 year, Wal-Mart expects to earn between $3.90 and $4.00 per share compared to analysts' current estimate of $3.97 per share for the year.
Shares of Wal-Mart (WMT, Fortune 500) declined less than 1% in pre-market trading.
--CNNMoney.com staff writer Hibah Yousuf contributed to this report.
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