Wal-Mart Stores Inc. (WMT), the world's largest retailer, posted an 8.5 percent increase in profits in the second quarter, beating Wall Street expectations by a penny.

Despite concerns over gasoline prices (search), the company's president and chief executive officer Lee Scott offered an optimistic assessment of the second half, saying that general improvements in the economy should help overcome the challenge.

"I still feel good about the year," Scott said.

The discounter said Thursday that it earned profits of $2.65 billion, or 62 cents per share, in the three months ended July 31. That compares with profits of $2.44 billion, or 56 cents per share, in the year-ago period.

Analysts surveyed by Thomson First Call expected 61 cents per share.

"This quarter, earnings grew faster than sales, and we improved operating profits in all our divisions," said Scott in a statement."We considered this a solid performance in a difficult retail environment. Now at the half way point, we are on track for another record year."

In a pre-recorded conference call, Scott emphasized that increased profit margins did not come from raising prices on merchandise, but from an improved merchandise mix, lower markdowns, and expanded global sourcing.

Total sales were $70.46 billion, up from $63.23 billion in the year-ago period.

Wal-Mart reported a 4.1 percent increase in sales at stores opened at least a year, known as same-store sales. Same-store sales are considered the best indicator of a retailer's performance.

Wal-Mart's store division posted a 3.2 percent same-store sales increase, while Sam's Clubs had an 8.8 percent gain.

For the six-month period, Wal-Mart reported earnings of $4.8 billion, or $1.12 per share, compared with $4.31 billion, or 98 cents per share.

Total sales reached $135.91 billion, compared with $120.45 billion a year ago.

On Thursday, the retailer announced plans to conduct background checks on all new-store associates before they are hired. After a yearlong pilot program nationwide, background checks will begin in the Midwest in September and spread across the country in the next months.

In time for back-to-school sales, Wal-Mart has relaunched the sale of apparel on its Web site. The company is offering its own lines and clothing by national brands.