Wal-Mart Stores Inc. (WMT), the world's biggest retailer, posted a 13 percent rise in quarterly profit on Tuesday and raised its outlook and expectations for holiday sales, saying the economy was improving.

But some analysts remained unconvinced, with lingering high oil prices and cost pressures weighing on Wal-Mart and other retailers ahead of the crucial holiday spending season.

Wal-Mart Chief Executive Lee Scott said the economy was continuing to pick up, and with oil prices easing and an improvement in the labor market, he was more optimistic about the Thanksgiving-to-Christmas period.

"I believe sales momentum will accelerate into the holiday," Scott told a prerecorded conference call. "We should have a better Christmas than last year."

Some analysts thought Wal-Mart was being overly bullish, with half of its earnings growth in third quarter coming from non-operating items and the company acknowledging its sales were disappointing and lower-than-expected.

Its shares were down 1.32 percent, or 76 cents, at $56.94 on the New York Stock Exchange (search). The Standard & Poor's Retail Index (search) fell 1.48 percent but analysts attributed this mainly to a larger-than-expected rise in producer prices in October that raised inflation fears. Retail stocks were lower almost across the board and were among the morning's weakest performers after a larger-than-expected jump in producer prices.

The Labor Department's PPI report released in the morning revived inflation concerns and worries the Federal Reserve (search) could be more aggressive about raising interest rates.

"It was a pretty low quality quarter with cost pressures continuing to be a problem and the management's tone was overly bullish," said analyst Emme Kozloff from Bernstein & Co. Inc.

Earnings for the third quarter ended Oct. 31 rose to $2.29 billion, or 54 cents per share, from $2.03 billion, or 46 cents per share, a year earlier. The results were in line with analysts' expectations as compiled by Reuters Estimates.

The improved results were driven partly by better gross margins, a widely used measure of profitability, with lower merchandise costs as Wal-Mart bought more from overseas and fewer price markdowns.

But this was offset by rising expenses due to higher costs for health care and fuel.

Other income, such as funds from recycling and financial services, also boosted earnings by about 1.8 cents per share, and a tax benefit added about 0.75 cent per share.

Sales rose just 9.7 percent to $68.5 billion -- its slowest growth rate in more than 18 months. Sales at U.S. stores open at least a year -- a key gauge of retail strength known as same-store sales -- only inched up 1.7 percent.

Performance of the company's namesake Wal-Mart stores was weak, with the company saying were customers hurt by high oil prices. Sales rose 8.3 percent to $45.89 billion, while same-store sales only increased 1.3 percent.

Sales at Wal-Mart's Sam's Club (search) warehouse stores rose 5.5 percent to $9.08 billion, with same-stores sales up 4 percent.

The fast-growing international division posted an 18- percent increase in sales to $13.55 billion, with good results in Mexico, Puerto Rico and Argentina.

Scott said Wal-Mart, regarded as a bellwether of the U.S. economy, was more optimistic about the rest of the year, with its fashions selling well and food sales good.

Wal-Mart nudged up its profit outlook for the full fiscal year, ending in January, to a range of $2.39 to $2.41 per share from a previous forecast of $2.36 to $2.40.

Analysts' average estimate was already $2.40 a share, according to Reuters Estimates.

The Bentonville, Arkansas-based company said it expects same-store sales to rise 2 percent to 4 percent in the fourth quarter, with earnings between 73 cents and 75 cents a share.

"I think the swing factor will be how low-income consumers now benefit from the lower gas prices and a more vigorous jobs market," said analyst Mark Miller from William Blair & Co.