GREENSBORO, North Carolina (Bloomberg) - Wal-Mart Stores Inc., the world's largest retailer, reported fourth-quarter sales that trailed its projection after cutting grocery and electronics prices, and predicted a "challenging" first quarter for US stores.

Sales at US stores open at least a year fell 1.6 percent, the Bentonville, Arkansas-based company said yesterday in a statement. Wal-Mart had projected sales to decline no more than one percent.

Wal-Mart reduced prices on laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to pay cheque. The deflation hurt sales, and disruptions caused by store remodeling also contributed to a "slight decline" in customer visits to US stores, chief financial officer Tom Schoewe said on a call with reporters.

"We see the influence of the paycheck cycle as pronounced now as it's been in the past," Mr. Schoewe said. Customers continue to be under pressure, he said.

The lower range of Wal-Mart's full-year forecast trailed analysts' projections. Earnings from continuing operations will be $3.90 to $4 a share, Wal-Mart said. That compares with the $3.98 average of analysts' estimates compiled by Bloomberg.

Wal-Mart dropped 86 cents, or 1.6 percent, to $53.20 at 9.51 a.m. in New York Stock Exchange composite trading. The stock fell 4.7 percent in 2009.

US sales will be "more challenging" in the first quarter and should improve as the year progresses, CEO Mike Duke said in the statement.

The retailer forecast first-quarter comparable-store sales in the US to be unchanged, plus or minus one percent. First-quarter profit will be 81 cents to 85 cents a share, Wal-Mart said. Analysts on average anticipate 85 cents.

Net income in the fourth quarter ended Jan. 31 increased 22 percent to $4.63 billion, or $1.21 a share, from $3.79 billion, or 96 cents, a year earlier. Excluding a tax benefit and a restructuring charge, profit totaled $1.17 a share, topping the $1.12 expected by analysts. Revenue advanced 4.5 percent to $113.7 billion, trailing analysts' estimates.

"The sales did come in soft and the comps are a little disappointing," Colin McGranahan, an analyst at Sanford C Bernstein & Co. in New York, said yesterday in a Bloomberg Television interview.

He rates Wal-Mart as "market-perform". "That's what propelling the stock on first trade."