New York, NY - The world's largest retailer Wal-Mart Stores Inc. (NYSE: WMT) disappointed investors on Wall Street on Thursday after the company indicated that it will miss fourth-quarter earnings expectations, pushing down the shares of the company by more than 7 percent.

The current economy remains challenging for all businesses in the country, and retailers have already seen customers pull back on discretionary spending, Wal-Mart acknowledges.

Retailers in the United States have been warning about weak same-store sales despite holiday season in the month of December that failed to boost revenue of the companies after consumers cut back on their spending in Christmas.

The sector have cited that struggling housing market and rising unemployment rate accompanied by weak income gains will continue to hamper the consumer purchases and their revenue growth throughout the season.

“Consumers went back into hibernation following a decent Black Friday,” Charles Grom, an analyst at JPMorgan Chase & Co., wrote in a Jan. 5 note to clients, according to Bloomberg News.

Grom has set his rating on Wal-Mart at “overweight” and expected its U.S. sales to rise by 2.6 percent last month, especially on Black Friday on Nov. 29, a day after Thanksgiving holiday.

Wal-Mart, which is the biggest seller of discounted products, has consistently reported better results compared to its rival retailers as it battled with economic slowdown in fiscal 2008.

Last year, large U.S. stores have played important role in sustaining the consumer spending by offering regular discounts and cheaper products. In the holiday season, consumers cut back on shopping for themselves or preferred shopping at discounters, dollar stores and warehouse clubs.

On Thursday, the company said that December same-store sales, or sales at stores open for at least one year, increased by 1.7 percent excluding fuel charges, which was less than the estimate of 2.8 percent rise in sales in the same period.

For the month of January, sales will remain unchanged and rise to 2 percent higher, the company said today in a statement.

“Consumers are very focused on value and necessities,” Tom Schoewe, executive vice president and chief financial officer of Wal-Mart, said. “We expect comparable store sales for the January four-week period to be between flat and two percent.”

It added that fourth-quarter profit from continuing operations will be 91 cents to 94 cents a share, which is lower from the previous estimate in November of $1.03 per share to $1.07 per share.

“Due to the difficult economy and severe winter weather in some regions, the holiday season was more challenging for retailers than expected,” Wal-Mart Stores Vice Chairman Eduardo Castro-Wright said. “We are pleased that we had positive traffic for the third month in a row and that Wal-Mart performed relatively well given the environment.”

In domestic market, the company said in the report today that grocery and health and wellness were the primary sales drivers for Wal-Mart U.S. in the December period. Electronics sales were solid, while apparel and jewelry were soft.

Wal-Mart blamed it on the weather conditions in the U.S. that slowed sales in several areas of the country the week before Christmas, forcing the closure of 40 stores for periods ranging from two hours to nine days.

Shares of the Bentonville, Arkansas- based company moved down by as much as $4.26 or 7.67 percent to $51.28 in pre-market session on Thursday, after closing lower by 48 cents or 0.86 percent to $55.54 in New York Stock Exchange composite trading yesterday.