NEW YORK - Rising gas prices are adding another obstacle to Wal-Mart Stores Inc.'s campaign to reverse a two-year U.S. sales slump.

Strong overseas revenue, growth at Sam's Club, and Wal-Mart's specialty - cost-cutting - pushed the world's largest retailer's net income up 3 percent in the first quarter, beating Wall Street expectations.

But business at home is still soft. In Tuesday's earnings report, Wal-Mart said it was seeing some improvements but needed more time to see whether hammering its low-price message and restocking items it had scrapped could turn around sales.

Separately on Tuesday, Home Depot Inc., the largest U.S. home-improvement chain, said its revenue edged down 0.2 percent to $16.82 billion for the quarter that ended May 1, missing Wall Street's $17.06 billion estimate.

The company said it was focusing more on affordable products and projects for homeowners. For instance, it is beefing up offerings such as paint and soft-sided tool storage as maintenance and repair - instead of major renovations - remain at the forefront of consumers' minds.

In its report, Wal-Mart offered a cautious second-quarter earnings outlook because of a new headache. It is worried its low-income customers will spend less at its stores as gasoline hovers around $4 a gallon. Wal-Mart's fears have deep repercussions because it's a bellwether of consumer spending and accounts for nearly 10 percent of all nonautomotive retail dollars spent in the United States.

"Despite improvements in some areas of the economy, core Wal-Mart U.S. customers are still stretched," Mike Duke, Wal-Mart's chief executive officer, said in a prerecorded conference call. "They remain concerned about rising prices for gas, energy, and food as well as employment issues. Customers trust us to be their ally in fighting rising gas prices and inflation."

U.S. Wal-Mart stores, which are 60 percent of the company's business, posted a 0.3 percent drop in revenue at stores open at least a year, their eighth straight quarter of revenue declines.

To reverse the declines, Wal-Mart is pushing to re-create the one-stop shopping experience at its super centers, an area it had dominated since the 1990s. That could help it lure shoppers who don't want to drive around to multiple stores.

Wal-Mart's net income rose to $3.39 billion, or 97 cents per share, in the three months ended April 30. That compares with $3.3 billion, or 87 cents per share, in the same period last year.

Revenue, excluding membership fees from Sam's Club warehouse stores, rose 4.4 percent to $103.41 billion.