Wal-Mart, the world's largest retailer, has unnerved the market after it reported solid results for the past three months but gave a cautious outlook.

The US retailer beat most estimates with a 23% jump in profits for the three months to the end of October.

But its forecasts for the coming holiday period were at the lower end of expectations.

This has prompted some analysts to suggest the group will have to resort to sharp discounting to keep customers spending.

Full trolley

Wal-Mart has more than 3,200 stores in the US and a further 1,100 internationally, including the Asda chain in the UK.

For the three months to 31 October, the group earned $1.8bn (�1.1bn).

This was slightly higher than analysts had been expecting after the group was forced to cut its estimates for September saying they had been "too optimistic".

Bryan Place, the principal at fund manager Place Financial Advisors, said the three-month result "wasn't a blow-out number, but it wasn't a number that would scare shareholders".

Cheap offers?

However, analysts were concerned by the retailer's projections for the coming three months.

This includes the crucial Christmas trading period.

Wal-Mart stuck to its sales estimates of between 3% and 5% growth.

But its earnings forecast, or the amount of money it makes on sales, was at the lower end of forecasts.

"It's clear that the company is going to offer very sharp price (discounts) to drive customer traffic," said Bill Dreher, retail analyst at WR Hambrecht.

Wary investors

Discount groups such as Wal-Mart have sustained the weak economy by attracting shoppers with their value offering.

But there is now concern that they will have to make even bigger cuts to sustain their growth.

"While sales will be respectable, the lower prices necessary to drive traffic will filter through to earnings," said Mr Dreher.

Investors appeared wary of the shares following the results, with shares up just 0.8% in early trading, or 45 cents, at $54.30.