Wal-Mart Stores, the world's largest retailer, today (17 February) blamed the strong dollar and a labour lawsuit charge for a  7.5% drop in fourth quarter profit, but said it is performing better than its competitors.

For the three months to 31 January, net income fell to $3.79bn, or $0.96 per share from $4.096bn, or $1.02 per share, a year earlier.

Sales at the Bentonville, Arkansas-based discounter edged up just 1.7% to $107.996bn as a 6% rise at its Walmart US stores and flat sales at its Sam's Club operation were offset by an 8.4% drop in international revenues.

On a constant currency basis, Wal-Mart said international sales would have gained 9% during the quarter. 

On a same-store basis and stripping out the effect of fuel, total US sales were up 2.8%, with a 2.8% rise at Walmart and a 2.5% increase at Sam's Club.

"Our performance relative to competitors was exceptionally strong in the fourth quarter and throughout the year," said Mike Duke, Wal-Mart president and chief executive officer.

"We expect this momentum to continue," he said, adding: "Wal-Mart remains well-positioned to continue to serve its customers in a challenging environment because of its strong price leadership."

For the full year, net income rose 5.3% to $13.4bn, or $3.39 per share, from $12.731bn, or $3.13 per share a year earlier.

Net sales for the fiscal year rose 7.2% to $401.2bn from $374.3bn a year ago.

Looking ahead, the company expects earnings to be between $0.72 and $0.77 per share for the first quarter of fiscal year 2010, and between $3.45 and $3.60 for the full year.

Wal-Mart has continued to benefit from shoppers flocking to its stores in search of bargains - although demand for grocery and health and wellness products has outstripped apparel sales.

Even so, the discount retailer last week said it was cutting between 700 and 800 jobs at its Walmart US and Sam's Club operations - including an unspecified number of apparel positions - as it tries to weather the economic storm.