By Nicole Maestri

NEW YORK (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) said on Tuesday that quarterly profit rose 7 percent as discounts drew in bargain-hunting U.S. shoppers, but its shares fell after the world's largest retailer issued a cautious outlook for the current period.

While Wal-Mart said the year was off to a "solid start," it indicated results for this quarter could miss Wall Street estimates as it contends with a tough economic environment, higher transportation costs and customers who are running out of money between paychecks.

Wal-Mart shares, which through Monday were up 22 percent year to date and have outperformed the 29 other components of the Dow Jones Industrial average, fell 2.1 percent in morning New York stock Exchange trading.

"Customers are faced with results of a tougher economy, higher gas prices, food inflation and the increase in the overall cost of living," said Eduardo Castro-Wright, head of Wal-Mart's U.S. operations, on a recorded call.

"The 'paycheck cycle' is more pronounced as things get tighter for customers toward the end of the month," he added.

Net income rose to $3.02 billion, or 76 cents per share, in the first quarter ended on April 30, from $2.83 billion, or 68 cents per share, a year earlier. The results matched analysts' average per-share forecast, according to Reuters Estimates.

For the second-quarter, Wal-Mart forecast earnings per share of 78 cents to 81 cents. Analysts on average are expecting 81 cents.

Telsey Advisory Group analyst Joseph Feldman said it made sense for Wal-Mart to issue a conservative forecast given the uncertain environment. But he expects the discount retailer to outperform its peers in this climate.