Wal-Mart Stores Inc. (WMT) on Tuesday posted its smallest quarterly profit gain in four years and gave a disappointing forecast for the current period, sending its stock down more than 3 percent, as rising oil prices curbed sales and drove up costs.

The 6 percent earnings growth for the latest quarter beat Wall Street expectations because of hot July weather that boosted summer merchandise sales.

But Wal-Mart missed its goal of increasing profits faster than sales, which were up 10.2 percent for the second quarter ended July 31. Its key U.S. Wal-Mart stores division generated disappointing results for the second consecutive quarter.

For the third quarter, Wal-Mart said it expects profit of 55 cents to 59 cents per share, compared with Wall Street's expectations of 61 cents.

"The most surprising aspect of the earnings release was management's more conservative outlook for the rest of the year, driven by the impact of higher oil prices on consumer spending," Sanford Bernstein analyst Emme Kozloff said.

Wal-Mart executives had previously been more optimistic about the second half, Kozloff said.

The company said second-quarter earnings rose to $2.8 billion, or 67 cents per share, from $2.7 billion, or 62 cents per share, a year earlier. Analysts on average were expecting 65 cents per share, according to Reuters Estimates.

The company's shares fell $1.64, or 3.3 percent, to $47.46 in early New York Stock Exchange (search) trade, weighing on stocks across the retailing sector.

Wal-Mart's earnings announcement came five days after rival Target Corp. <TGT.N> reported a bigger-than-expected profit, sending its stock higher. Target shares were down 85 cents, or 1.5 percent, at $56.30 on the NYSE on Tuesday morning.

Drawing more than 100 million U.S. customers each week, Wal-Mart said it remained upbeat on the U.S. economy, but oil prices that topped $67 a barrel this month were a big concern. Economists often view the company as a barometer of consumer sentiment.

"Inflation in the U.S. appears to be well under control," Chief Executive Officer Lee Scott said on a recorded message. "The only real economic concern I have is that oil prices will erase improvements in employment and real income for an important portion of our customer base."

Gasoline prices have hit Wal-Mart's core low-income customers particularly hard, and the company has started offering more upscale goods in hopes of bringing in wealthier shoppers who are less sensitive to fuel prices.

Target's (TGT) sales growth has outpaced Wal-Mart's in recent quarters, in part because its trendy-but-affordable clothing appeals to middle- and upper-income shoppers.

High oil prices also mean increased costs for Wal-Mart, which operates one of the largest U.S. trucking fleets. The retailer estimated that it cost $30 million more this quarter to move goods from its distribution centers to the stores.

Quarterly sales rose to $76.8 billion from $69.7 billion a year earlier, while sales at U.S. stores open more than a year -- a key retail measure known as same-store sales -- increased 3.5 percent.

At the Sam's Club (search) warehouse stores, operating income rose 5.4 percent, while sales grew 5.9 percent.

The international division reported only a 0.3 percent gain in operating income, hurt by a $36 million restructuring charge at the UK Asda chain. Sales were up 12.3 percent, although a strong Canadian dollar and Mexican peso inflated results.

Wal-Mart cut hundreds of Asda headquarters jobs and added more store employees in hopes of boosting sales, and said it was already seeing improvement there.

The retailer said it expects international profits to grow faster than sales by the third quarter.