(Financial Times) Walmart, the world’s largest retailer, said comparable sales at its US stores fell 2 per cent during its fourth quarter against last year, and warned of a “more challenging” first quarter in the US, compared with last year’s strong growth.

Net US sales fell 0.5 per cent to $70.9bn, believed to be Walmart’s first US sales decline.

Its Sam’s Club chain reported a 0.7 per cent rise in comparable sales, excluding fuel.

Walmart attributed the fall to factors including deflation in the price of groceries – which account for more than 40 per cent of US store sales – and electronics such as flat-screen televisions.

But Tom Schoewe, chief financial officer, said customer traffic had also fallen, with performance affected by store remodelling related to Walmart’s Project Impact initiative, which involves reducing the stock item inventories and simplifying store layouts.

“Clearly Project Impact had a bit more impact on our traffic and our results than we had expected,” he said.

The retailer reported adjusted earnings of $4.5bn, or $1.17 per diluted share, excluding a 4 cent charge from a recent restructuring, and a 10 cent benefit from tax credits related to the repatriation of non-US earnings. Wall Street had been expecting earnings of about $1.12 a share.

Sales increased 4.6 per cent to $112.8bn against the same period last year.

Walmart reported full-year sales of $405bn, up 1 per cent on last year, with its international sales surpassing $100bn for the first time. On a constant currency basis, sales would have hit $414.8bn, up 3.4 per cent.

Mike Duke, chief executive, said Walmart earnings for the fourth quarter had exceeded its expectations, reflecting “the ongoing underlying strength of our business” and its focus on “delivering growth, leveraging expenses and improving returns”.

It ended the year with inventory down 7.8 per cent against the same period last year, as it continues its store profitability drive and benefited from deflation.

Mr Duke said the retailer expected continued strong international growth in the current year.

“US sales will be more challenging in the first quarter, as Walmart US cycles through strong year-over-year comparisons and deflation,” he said.

The company expects diluted earnings per share for its current fiscal year to be between $3.90 and $4.00, with first-quarter earnings per share in the range $0.81 to $0.85.