NEW YORK (Bloomberg) - Wal-Mart Stores Inc.'s renewed focus on low prices amid a slowing US economy may have revived sales at the world's largest retailer.

Wal-Mart will probably say on February 19 that fourth-quarter sales at stores open at least a year increased 1.5 percent, said Deborah Weinswig, a Citigroup Inc. analyst. For the first time in three-and-a-half years, the Bentonville, Arkansas-based company's sales growth may have outpaced that of Target Corp., the second-biggest US discount chain.

CEO Lee Scott discounted prices sooner and on more items than rivals to lure consumers coping with a depressed housing market as well as higher food and fuel costs. Net income probably rose 4.2 percent to $4.11 billion, or $1.02 a share, in the three months through January 31, while sales gained 7.8 percent to $106.8 billion, according to the average estimate of 14 analysts in a Bloomberg survey.

"The batting average on their decisions has been good," said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, with $12 billion in assets including Wal-Mart shares. "It's improvement by increments, and now it sort of adds up to a critical mass."

After a failed attempt to boost profit by attracting fashion-conscious shoppers with silk lingerie and velvet jackets in 2005 and 2006, Wal-Mart returned to emphasizing food and household merchandise at cut-rate prices at its more than 4,100 US stores. The company marked down 20 percent more items going into the holiday season compared with 2006, and kept prices low into January.

Target said last week that its fourth-quarter same-store sales rose 0.2 percent. That would mark the first time since August 2004 that Wal-Mart's growth outpaced Target's.

"Wal-Mart has a higher proportion of essentials and groceries, so they definitely would maintain their sales better in a slowing environment," said David Abella, an analyst at Rochdale Investment Management in New York, with $2.5 billion in assets including Wal-Mart shares.

Consumers are coping with gasoline prices in excess of $3 a gallon, rising milk prices and the worst housing market in a quarter of a century.

About half the items sold at Wal-Mart are also sold in supermarkets, compared with about 20 percent at Target, Ms. Weinswig, who is top-ranked by Institutional Investor, wrote in a February 3 report. The New York-based Ms. Weinswig has named Wal-Mart her "top pick" this year.

The average price of a gallon of milk was $3.81 last month, according to the Agriculture Department, 16 percent higher than a year earlier. Gasoline prices last month were 37 percent more than in the previous January, according to the US Department of Energy.

Wal-Mart is rebounding in New York trading after three years of declines. The stock gained 2.9 percent in 2007, compared with a 12 percent drop for Target. Shares advanced four percent this year after falling 53 cents to $49.44 in New York Stock Exchange composite trading.

Robert Drbul, an analyst at Lehman Bros. in New York, raised his 2008 price target by $1 to $55 and his full-year earnings estimate by five cents to $3.35 a share, citing the company's initiatives and the likelihood that a slowing economy and tax-rebate checks issued later this year will lure customers. He rates the shares "overweight."

Wal-Mart is benefiting from renovations at more than half its US discount stores, Mr. Sorrentino said. The overhauls helped boost employee morale, he said.

"They've made the stores more attractive, and the associates are more pleasant to deal with," Mr. Sorrentino said.

Wal-Mart is revamping its clothing and home goods lines after those sales fell. It named new executives to oversee its clothing unit in July and is moving design functions from Bentonville to expanded quarters in New York City. Wal-Mart is adding two exclusive home brands this year, including one under the Better Homes and Gardens label.

Wal-Mart shook up management last month, dispersing the duties of vice-chairman John Menzer, who will retire on March 1, among various executives. Mr. Menzer was responsible for the company's general strategy.

Some of the changes may benefit from a slowing economy, Mr. Abella said, because Wal-Mart may attract and retain consumers who might have shunned the retailer during more prosperous times.

"In a booming retail environment it might have actually fallen a little flatter," he said.