UPDATE 5-Wal-Mart profit up 4 pct, better than expected

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By Nicole Maestri

NEW YORK, Feb 19 (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) posted better-than-expected fourth quarter profit on Tuesday as penny-pinching U.S. shoppers scoured its discount stores for low prices on necessities like food to offset tough economic conditions.

The world's largest retailer, which has cut prices to try to win sales in the tough environment, acknowledged that the economic situation remains "challenging," and it gave a first-quarter and full-year earnings forecast that could come in below Wall Street's expectations.

Joseph Feldman, an analyst with Telsey Advisory Group, said that given the tough climate, in which many U.S. retailers have cut their sales or earnings forecasts as shoppers rein in spending, providing a cautious earnings forecast near Wall Street's expectations was "perfectly fine."

"Wal-Mart is perfectly positioned for this type of environment," he said. "They've got a lot of consumable items, like groceries, so they're going to drive traffic and maybe even get additional traffic because of this environment."

Net income rose 4 percent to $4.096 billion, or $1.02 per share, for its fiscal fourth quarter ended Jan. 31, from $3.94 billion, or 95 cents per share, a year earlier.

The most recent quarter's results included charges of 3 cents per share for dropped real estate projects and a restructuring charge for its Japanese operations, and a 1 cent per share benefit from the sale of real estate properties.

Excluding the items, Wal-Mart reported earnings of $1.04 per share, above analysts' average estimate of $1.02 per share, according to Reuters Estimates.