Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) on Thursday posted strong quarterly profit growth thanks to spring clothing demand, but Wal-Mart said steep gasoline prices could curb consumer spending.

The largest U.S. discount retailers both reported double-digit sales increases for the first fiscal quarter as a strengthening U.S. economy and bigger tax refund checks spurred spending, particularly on clothing and electronics.

But Wal-Mart Chief Executive Lee Scott said he was wary of high gasoline prices, which cut into spending power and also raise retailers' costs.

Wal-Mart, the world's biggest retailer, says that more than 100 million people shop its U.S. stores each week, which makes it a valuable barometer of U.S. consumer spending.

"I started the year with an optimistic view," Scott said on a recorded message. "I still feel that way. Although I am concerned about high gasoline prices, ... I believe that growth in employment and real income will lessen the impact."

Scott said high gasoline prices reduced the typical Wal-Mart customer's disposable income by an average of more than $7 each week.

The U.S. average national price per gallon hit a record high of $1.941 earlier this week. Pump prices are up 45 cents per gallon from one year ago because of strong demand, tight supplies and high crude oil costs.

Wal-Mart's outlook "is still positive, but more muted than it was in February," said Sanford Bernstein analyst Emme Kozloff. In February, Scott said he was more optimistic than he had been in years.

Shares of Wal-Mart fell more than 1 percent and Target shares were down about 2 percent in New York Stock Exchange trading.

Wal-Mart and Target reported strong spring clothing demand as a wide selection of brightly colored fashions appealed to shoppers. Many designers stuck to conservative styles in the wake of the Sept. 11, 2001 attacks on the United States, but this year's lines feature upbeat colors such as pink.

Last spring, sluggish apparel demand left many retailers with big stockpiles of clothing, which they later sold at much lower prices, cutting into profits and sales.

For the fiscal first quarter ended April 30, Wal-Mart's earnings rose to $2.2 billion, or 50 cents per share, from $1.9 billion, of 42 cents per share, a year earlier. Last year's figures include results from a distribution business that Wal-Mart sold in May 2003.

Analysts on average expected profit of 49 cents per share, according to Reuters Research, a unit of Reuters Group Plc.

Quarterly sales rose 14.2 percent to $64.8 billion, with sales at U.S. stores open at least a year — a key retail measure known as same-store sales — up 6.4 percent.

Target, which is considering selling its Marshall Field's and Mervyn's department stores, said it earned $438 million, or 48 cents per share, in the fiscal first quarter ended May 1. That compares with earnings of $349 million, or 38 cents per share, in the same period a year ago.

Analysts, on average, expected a profit of 47 cents per share, according to Reuters Research.

Total revenue rose 12.3 percent to $11.59 billion in the quarter, driven by a 14.0 percent increase at Target stores. Same-store sales rose 6.6 percent.

The department stores have been a drag on sales and earnings in recent years, but Target said pretax profit increased at both Mervyn's (search) and Marshall Field's (search) this quarter.