Paul Sakuma, Associated Press
A family shops at Wal-Mart in San Jose, Calif. The retailer is raising its full-year forecast as it benefits from low prices that are attracting shoppers. Chain's 10 percent second-quarter revenue gain was its biggest since the fourth quarter of 2006.

Wal-Mart Stores Inc., the world's largest retailer, said the boost from U.S. tax-rebate checks is beginning to fade after second-quarter profit rose 17 percent.

Net income climbed to $3.45 billion, or 87 cents a share, from $2.95 billion, or 72 cents, as consumers spent more on lower-priced medicine and food, the company said Thursday. In the third quarter, sales at stores open at least a year may rise as little as 1 percent after rising 4.5 percent in the second quarter, Wal-Mart said.

"Going forward into back to school, those checks are all gone," Howard Davidowitz of Davidowitz & Associates Inc., a New York-based consulting and investment banking firm, told Bloomberg Radio Thursday. "Look for Wal-Mart to soften up a little bit. It's a tough environment."

Wal-Mart, based in Bentonville, Ark., painted the bleaker picture as the Labor Department said U.S. consumer prices climbed 0.8 percent in July, twice as much as economists anticipated. The cost of living was up 5.6 percent in the 12 months through July, the biggest jump in 17 years, the department said Thursday. So-called core prices, which exclude food and energy, also rose more than projected. (See story on A1.)

"When energy and oil prices go up, on top of inflation in health care and core food items, there's a great deal of pressure on the consumer," Wal-Mart Chief Executive Officer H. Lee Scott, 59, said Thursday on a recorded call.

Macy's Inc., the second-largest U.S. department-store chain, said Wednesday sales may slow further this year, signaling the U.S. economic slump may drag into 2009.

Excluding some items, Wal-Mart's second-quarter profit beat analysts' estimates by 2 cents. Revenue advanced 10 percent to $102.7 billion from $93 billion, the biggest gain since the fourth quarter of 2006.

Rebate spending helped the company beat its second-quarter profit forecast, Chief Financial Officer Thomas Schoewe said on the call. Congress voted for the rebates in February as part of a $168 billion package to stimulate an economy slowed by record mortgage foreclosures, job cuts and rising prices of food and fuel.

"Before and after the economic stimulus checks, we've seen that the paycheck cycle is more pronounced that it has been historically," Schoewe said in an interview. "Things are even more difficult for our customer now than they have been in the recent past."

Wal-Mart predicted per-share profit for the year that ends in early 2009 will be $3.43 to $3.50, up from the $3.30 to $3.43 it forecast in February. Analysts surveyed by Bloomberg estimated $3.47 a share on average.

Wal-Mart shares rose 22 cents to $58.10 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 22 percent this year, making the retailer the best performer among the 30 members of the Dow Jones Industrial Average, which has dropped 12 percent.