GREENSBORO, NORTH CAROLINA (Bloomberg) - Rising gasoline prices are fueling a rally in shares of Wal-Mart Stores Inc., the world's largest retailer.

The average US pump price for regular gasoline climbed to a record $3.976 a gallon last week, according to the US Department of Energy, a 45 percent increase since August 27.

Wal-Mart gained 32 percent in New York trading in the same period as consumers flocked to its stores for discounted prices and because they can find everything from groceries to clothing in one place.

Wal-Mart has attracted investors in times of rising gasoline prices before. From the beginning of 1999 until the middle of 2000, the average price for a gallon of gas surged 79 percent, while Wal-Mart rose 34 percent.

"I use less gas to go there, and the prices are cheaper," said Loretta Whitesell, 48, a home-loan processor in Greensboro, North Carolina. She spends about $170 a week on groceries, detergent, soap and clothes, and about $92 a week filling up her 2004 Dodge Durango sports-utility vehicle.

Wal-Mart's May sales rose 3.9 percent, the Bentonville, Arkansas-based company said today, faster than it predicted, as grocery and medicine discounts attracted consumers.

"Consumers trying to double up their trips and get the most out of them is an effect we're seeing across the board," Peter Sorrentino, a portfolio manager at Huntington Asset Advisors, said in a Bloomberg Television interview on May 29. The Cincinnati-based firm owns Wal-Mart shares among $15 billion in assets.

"There's no question that the influence of gas prices is affecting our customer," Wal-Mart chief financial officer Thomas Schoewe told reporters today in Bentonville.

Wal-Mart responded to consumers "living paycheck to paycheck" by expanding its $4 medicine offerings and cutting prices, Mr. Schoewe said.

As a result, in May, more consumers visited Wal-Mart stores and spent more on the average transaction, reversing a trend of people limiting store visits to save gas, Mr. Schoewe said.

"We had an increase in traffic despite the higher gas prices," Mr. Schoewe said. "What that speaks to is our customers' demand for value."

CEO H Lee Scott ordered discounts as deep as 30 percent to spur demand for drugs, groceries and flat- screen televisions and lure customers to Wal-Mart, which accounts for almost a tenth of spending at US retailers.

If Wal-Mart sustains its pace for all of 2008, it would result in the best performance by the stock in nine years. Wal-Mart's 21 percent increase this year before yesterday was the second best in the 40-company Standard & Poor's 500 Consumer Staples Index after chewing gum maker Wm. Wrigley Jr Co., which Mars Inc. agreed to buy for $23 billion in April.

Wal-Mart rose $1.49, or 2.6 percent, to $59.17 at 9.43am in New York Stock Exchange composite trading.

The retailer may have learned from its mistakes. From the beginning of 2004 through August 2005, as gasoline rose 73 percent to $2.61 a gallon, Wal-Mart fell 4.3 percent as it tried to lure more affluent shoppers with more fashionable clothes at higher prices. Last year the company re-emphasised its original message that it is a place to by discounted goods.

"Wal-Mart is ideally suited to gain share across today's challenging consumer spending background where customers seek to stretch their dollars further," Adrianne Shapira, a Goldman Sachs Group Inc. analyst in New York, wrote in a June 2 note to investors. She recommends buying the stock.