Turning around a prolonged U.S. sales slump is key to Wal-Mart Stores Inc's success, and Tuesday's results will show if the retailer's strategies to mend its biggest business have really started to pay off.

Wal-Mart is making every effort to offer the best prices on a wider variety of goods in order to win over shoppers who have gone to other chains, such as dollar stores, and who continue to cut back on spending as high unemployment and other economic troubles persist.

The world's largest retailer has suffered two consecutive years of declines in sales at U.S. Wal-mart stores open at least a year. It predicted that U.S. same-store sales would return to positive territory this year, maybe as soon as the second quarter, though most industry-watchers predict the return to growth at its biggest unit will take a bit longer.

In May, Wal-Mart forecast same-store sales at the Wal-mart chain in the United States, excluding fuel, would be down 1 percent to up 1 percent. Analysts, on average, expect to see a 0.6 percent decline, according to Thomson Reuters data.

They are having to get more competitive on pricing just as inflation is hitting, Wall Street Strategies analyst Brian Sozzi said of Wal-Mart.

As Wal-Mart works to offer the lowest prices, manufacturers from Kellogg Co to Procter & Gamble Co

are trying to raise prices as they pay more for essentials such as grains and oil-based materials, highlighting the pressures facing major companies, not to mention the low-income shoppers trying to buy their goods.

Raymond James analyst Budd Bugatch checked prices on a variety of groceries on August 11, and found that Wal-mart's price advantage on branded goods narrowed versus Target Corp and Publix

after two months of expansion. Wal-mart was still the price leader, but to a lesser extent than in July.

At the same time, the price of a basket of goods sold under Wal-mart's Great Value private brand fell for just the second time in the 14 months Bugatch has tracked such data, he said.

Wal-mart's everyday low-price strategy now includes stepped-up advertising behind its guarantee to match competitors' prices. The company is also busy bringing thousands of items such as fishing lures and fabric back to thousands of stores to satisfy shoppers.

Wal-mart U.S. is Wal-Mart's biggest unit by far, accounting for $260.3 billion, or 62.1 percent, of sales in fiscal 2011, so growth in the business is crucial.

For now, strong results from its smaller international units and Sam's Club warehouse club unit should continue to help mitigate the impact of the U.S. slump.

(Reporting by Jessica Wohl, additional reporting by Brad Dorfman, editing by Matthew Lewis and Matt Driskill)

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