Wal-Mart sales rise as it girds for competitive holiday season

(Reuters) - Wal-Mart Stores Inc (WMT.N) same-store sales, helped by lower gas prices, rose for the first time in seven quarters, but the world's largest retailer warned it was preparing for a bruising holiday season as it moves to match prices with online outlets.

Wal-Mart said on Thursday comparable sales at stores open at least 12 months rose 0.5 percent in the third quarter ending Oct. 31, buoyed by growth in its small-format locations. The market was expecting flat same-store sales, according to Consensus Metrix.

The results suggest Wal-Mart's core low-income customer, whose spending power has been limited by stagnant wages and cuts to food stamp benefits, may be loosening their purse strings, encouraged by the drop in gasoline prices below $3.

"Our sense is that consumer confidence is reasonable out there and there is no doubt that lower gas prices are probably giving us a bit of benefit as well," Greg Foran, head of the U.S. business, told reporters.

Wal-Mart shares rose 3.6 percent to $82.07 on the New York Stock Exchange.

Quarterly sales from new and existing stores rose to $119 billion from $115.7 billion, paced by demand for home goods and apparel, and 5.5 percent growth in comparable sales at Neighborhood Market outlets, the smaller format in which it is investing to counter slowing growth in Supercenters.

The results compared favourably with competitor Kohl's Corp (KSS.N), which said its same-store sales dropped for the fifth straight quarter, hit by weak sales of women's apparel.

Not all of Wal-Mart's report was positive. Customer traffic in the United States dropped 0.7 percent in the quarter, and operating income fell on higher health-care costs and investments in e-commerce.

Wal-Mart lowered the top end of its full-year profit forecast to $5.02 per share from $5.15, partly citing expectations of a highly competitive holiday season.

Foran said he informed managers they could match prices with Amazon.com Inc (AMZN.O) and other online retailers, formalising a practise already in place in about half of its roughly 4,300 stores in the United States.

Net profit attributable to Wal-Mart fell to $3.71 billion, or $1.15 per share, for the quarter ended Oct. 31, from $3.74 billion, or $1.14 per share, a year earlier. Analysts on average expected earnings of $1.12 per share, according to Thomson Reuters I/B/E/S.

(This story was corrected as the company clarifies executive comment to show that online price matching to affect roughly 4,300 stores, not 5,000, im the penultimate paragraph)

(Reporting by Nathan Layne in Chicago and Siddharth Cavale in Bangalore; Editing by Saumyadeb Chakrabarty and Alan Crosby)