Wal-Mart Stores Inc. (WMT) on Thursday reported a weaker-than-expected first-quarter profit as steep energy prices and cool, wet weather cut spring sales and warned that results for the current quarter would miss Wall Street forecasts.

Shari Eberts, retail analyst with J.P. Morgan, said the company's second-quarter forecast "is the largest negative revision in recent memory," and shares of Wal-Mart (search) fell nearly 4 percent in early trading.

Wal-Mart's sales have suffered in recent quarters as soaring gasoline prices cut into household budgets, and the world's No. 1 retailer said it expects energy prices to weigh on second-quarter results too.

Still, the company said it expects trends to improve in the second half of the year and it remained optimistic about the U.S. economy.

Wal-Mart's weak first-quarter performance comes in contrast to rival Target Corp. (TGT), which reported better-than-expected earnings as it kept prices up and reaped profits from its credit card operations. In contrast to Wal-Mart's focus on low prices, Target has carved out a niche selling stylish goods at low prices, as well as catering to consumers drawn just by price.

"Wal-Mart's focus on the lower-end consumer will continue to be a drag on comparable store sales," said Jaison Blair, retail analyst with Rochdale Research.

Blair, who rates Wal-Mart shares "hold," said he advised clients not to buy the stock even at Thursday's lower prices.

Bentonville, Ark.-based Wal-Mart had a net profit of $2.5 billion, or 58 cents per share, in its fiscal first quarter ended April 30, compared with $2.2 billion, or 50 cents per share, in the same period a year earlier.

Excluding gains from a tax resolution and legal developments, the retailer had an operating profit of 55 cents per share, below the average analyst estimate of 56 cents per share, according to Reuters Estimates.

"Our results were not up to Wal-Mart standards," Chief Executive Lee Scott said in a recorded message, citing the steep oil prices and the inclement weather in parts of the United States.

"We should pick up momentum into the second half of the year," he added. "The biggest unknown is the impact of gasoline prices on our customer base. If oil prices stay at the current level, or hopefully go lower, we would see better sales momentum."

Scott said oil prices appeared to be stabilizing, and he saw signs of improvement in the job market and real income.

Wal-Mart said in April that quarterly earnings would likely be around the low end of its forecast for 56 cents to 58 cents a share, prompting many analysts to lower their estimates.

Rising costs for store labor, health care and utilities also hurt profits, Wal-Mart said.

Quarterly sales rose 9.5 percent to $70.9 billion, while sales at stores open at least a year — a key retail measure known as same-store sales — rose 2.9 percent, below the company's forecast for 3 percent to 5 percent growth.

Spending on discretionary items like spring fashions and patio furniture was unusually weak, the retailer said.

International sales jumped 12.4 percent to $14.1 billion, helped by a weak dollar versus the British pound, euro and Canadian dollar. Stripping out the estimated $386 million in currency benefit, international sales were up 9.4 percent.

Wal-Mart said results were particularly weak in Britain, where its Asda division reported slowing sales and increased competition. Asda had been one of Wal-Mart's strongest divisions in recent years.

At the Sam's Club (search) warehouse division, sales rose 5.9 percent to $9.2 billion.

The company said it expects second-quarter earnings in the range of 63 cents to 67 cents per share. Analysts, on average, expected 70 cents per share, according to Reuters Estimates.

The retailer said its full-year forecast of $2.70 to $2.74 per share was still possible, but would be "far more difficult" to reach given the weak second-quarter forecast. Eberts, of J.P. Morgan, said Wal-Mart was unlikely to reach its full-year target "without meaningful improvement in the macro environment."

Shares in Wal-Mart fell $1.85 to $46.75 in early New York Stock Exchange trading.