Wal-Mart Stores Inc (WMT.N) on Tuesday reported higher-than-expected U.S. sales, helped by more customer visits to its stores and accelerating online activity, and shares of the world's largest retailer rose more than 3 per cent.

Investors shrugged off an 8 per cent drop in gross profit margins stemming from Wal-Mart's continued efforts to cut prices to make them more competitive, along with discounts offered after the holiday season.

The results buck a string of disappointing holiday sales figures from rivals including Target Corp (TGT.N), which reports earnings on Feb. 28.

Wal-Mart said it expected earnings per share of 90 cents to US$1 for the current quarter and US$4.20 to US$4.40 for this fiscal year. Analysts' estimates were within both ranges.

The company said sales at U.S. stores open at least a year rose 1.8 per cent, excluding fuel price fluctuations, during the fourth quarter ended on Jan. 31. Analysts on average were expecting a 1.3 per cent increase in comparable sales, which include e-commerce, according to research firm Consensus Metrix.

Under Chief Executive Officer Doug McMillon and new e-commerce chief Marc Lore, Wal-Mart has been trying to catch up with online rival Amazon.com Inc <AMZN.O>. In October, the company said it would slow the pace of new store openings to focus on expanding its e-commerce business.

Chief Financial Officer Brett Biggs said comparable sales were up at all store formats due to a steady improvement in stores, strong growth from e-commerce and a growing contribution from the online grocery business.

"We've now seen nine consecutive quarters of traffic growth in our stores," Biggs said on a conference call with reporters. "Clearly, we're gaining traction."

U.S. store visits rose 1.4 per cent, compared with a year-earlier increase of 0.7 per cent.

Despite lower food prices, Biggs said comparable sales rose in Wal-Mart's grocery business, which accounts for nearly 53 per cent of overall revenue.

A delay in refund checks from the Internal Revenue Service has curbed customer spending somewhat, Biggs said. He still expects comparable sales to rise 1 per cent to 1.5 per cent in the first quarter ending on April 28.

Net income attributable to Wal-Mart fell to US$3.76 billion in the fourth quarter from US$4.57 billion a year earlier, reflecting the impact from discontinued real estate projects and severance.

Excluding items, earnings per share of US$1.30 exceeded the analysts' average estimate of US$1.29, according to Thomson Reuters I/B/E/S.

Revenue rose 1 per cent to US$130.9 billion, with the depreciation of the Mexican peso to the U.S. dollar curbing growth. Excluding currency fluctuations, sales came to US$133.6 billion.

E-COMMERCE ACCELERATES

Online sales increased 29 per cent, accelerating from 20.6 per cent in the third quarter. That business added 80 basis points to fourth-quarter comparable sales.

Lore said Wal-Mart had a "nice uptick" in online sales after it recently made two-day shipping free in the United States. The retailer will keep looking for acquisitions "wherever it makes sense," he added.

Wal-Mart recently acquired online outdoor clothing and gear retailer Moosejaw for US$51 million in cash, its third purchase in about six months.

The company announced a 2 per cent dividend increase to US$2.04 a share annually.

Shares of Wal-Mart were up 3.5 per cent at US$71.78 in morning trading. At Friday's close, they had risen 0.4 per cent since the start of the year.