In this December 15, 2010 photo, a view of the entertainment section of a Wal-Mart store is seen in Alexandria, Va. (Photo: AP)

NEW YORK, United States

Wal-Mart Stores Inc reported a 27 per cent increase in fourth-quarter net income as the world’s largest retailer benefited from cost-cutting and strong sales overseas.

But a key revenue measure in the company’s US business fell for the seventh quarter in a row and came in worse than Wal-Mart’s own projection, raising doubts the company can turn around its US business this year.

Wal-Mart posted net income of US$6.06 billion, or US$1.70 per share, in the quarter ended January 31. That compares with US$4.76 billion, or US$1.25 per share, a year earlier.

Total revenue rose 2.4 per cent to US$116.3 billion. Net sales, excluding membership and other income, increased 2.5 per cent to US$115.6 billion.

Revenue at stores opened at least a year fell 1.1 per cent, dragged down by a 1.8 per cent drop at the namesake discount stores, which account for more than 60 per cent of its business. Analysts had expected a 0.8 per cent increase, according to FactSet, but worries on Wall Street mounted in recent days after reports of a weak holiday season.

Excluding one-time items including a tax benefit, earnings were US$1.34 per share. Analysts expected earnings of US$1.31 per share on net sales of US$117.52 billion.

“Some of the pricing and merchandising issues in Wal-Mart ran deeper than we initially expected, and they require a response that will take time to see results,” CEO and President Mike Duke said in a statement.

Wal-Mart executives had told investors in November that the holiday quarter would mark the end of the streak in declining revenue, counting on a number of steps in recent months to reverse mistakes in pricing and merchandising.

Over the past year, the company scrambled to add back thousands of products it had culled as part of a renovation of its stores. In recent months, it went back to emphasizing low prices across the store. But Wal-Mart’s disappointing holiday report shows that those changes are taking time to lure back shoppers who defected to rivals.

Wal-Mart’s funk contrasts with where it found itself at the beginning of the recession in late 2007. Unlike most stores, Wal-Mart thrived. Its core customers — households making less than US$70,000 a year — bought more. Affluent shoppers became price-conscious and discovered Wal-Mart’s prices were hard to beat.

Shoppers also liked that Wal-Mart’s stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. But that renovation started to backfire in 2009. As part of the renovation, it had removed thousands of products from stores. Shoppers went elsewhere to find their favorite brands.

Another big mistake was pricing. Last year, the company strayed from its “everyday low prices” slogan, the bedrock philosophy of founder Sam Walton. Instead, the company slashed prices only on select products, and the deals were temporary. That confused shoppers, and gave them less confidence that they would find the cheapest prices.

Meanwhile, Wal-Mart has been squeezed by increasing competition from dollar stores, grocery chains and Target Corp, which last October began giving customers who pay with its branded credit or debit card a five per cent discount.

Dollar stores are winning over customers with convenience, and Wal-Mart is fighting back by working with suppliers to come up with smaller packages. Wal-Mart also plans to open smaller stores in urban markets, but analysts say that Wal-Mart is moving too slow on these initiatives.

Wal-Mart’s profits and its international business remained a bright spot. The company said that Wal-Mart’s international business remains its growth engine and it expects growth in emerging markets to speed up.

For the fourth quarter, international sales rose almost nine per cent, while at Walmart’s US business, they slipped 0.5 per cent, the second quarterly decline in a row. At Sam’s Club, revenue increased 4.4 per cent.

Wal-Mart expects first-quarter earnings per share between 91 and 96 cents. Analysts expected 96 cents per share, according to FactSet. The company also forecast that earnings for the year would be between US$4.35 and US$4.50 per share. Analysts expect US$3.67 per share.