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Bentonville, Ark. — Wal-Mart Stores Inc. reported a 7 percent decline in first-quarter profit as worker pay raises, spending on e-commerce and currency fluctuations put pressure on the bottom line at the world's largest retailer.

The company also reported a 1.1 percent increase for a key sales measure at its U.S. Wal-Mart stores, its third consecutive quarter of increases. However, that growth came below analysts' expectations.

Wal-Mart's profit and total sales, which missed Wall Street estimates, come as questions are rising about the health of consumer spending. The latest government retail sales figures showed spending was flat in April, and Macy's, Kohl's and J.C. Penney announced disappointing results despite low gas prices and improvements in the job market.

The retail industry also is battling temporary issues such as the labor dispute at West Coast ports that has delayed shipments of merchandise, and cooler-than-usual temperatures that chilled consumers' interest in spring merchandise.

Wal-Mart itself is a barometer of consumer spending, and its challenges reflect the struggles of its low-income shoppers who are being squeezed by stagnant wages and higher living costs like rent.

Wal-Mart is also facing fierce competition from the likes of online king Amazon.com, dollar stores and grocers. It's also dealing with a shift among shoppers seeking the convenience of small stores or buying on their mobile devices and PCs.

In response, Wal-Mart is rapidly expanding its small store formats. It is also increasing its spending for its online operations to between $1.2 billion and $1.5 billion this year, up from $1 billion last year. It announced last week it was testing an unlimited free-shipping service for $50 a year, undercutting Amazon.com's popular Amazon Prime, whose annual dues are $99.

And in Wal-Mart's U.S. division, the company is dissecting every part of its business, from improving the freshness of the produce to improving customer service to making sure it has the lowest prices.

The moves are being spearheaded by Greg Foran, who had been president and CEO of Wal-Mart Asia and took over the helm of the U.S. business, last summer. In February, the company also announced that it will be raising its minimum hourly wages to $10 by next February.

Clearly, such investments squeezed profits for the latest quarter.

Wal-Mart said that net income was $3.34 billion, or $1.03 per share, for the three months that ended April 30. That compares with $3.59 billion, or $1.11 per share, a year earlier.

Net revenue was down slightly to $114.0 billion, from $114.2 billion in the year-ago quarter.

Analysts were expecting $1.04 per share and revenue of $116.27 billion, according to Zacks Investment Research.

Wal-Mart shares have declined roughly 7 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed slightly more than 3 percent. The stock has risen almost 4 percent in the last 12 months.

Shares fell $1.87, or 2.3 percent to $78.05 in premarket trading.

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