UPDATE 2-Wal-Mart overseas profit climbs, UK's Asda shines

* Q3 international underlying operating profit up 9 pct

* Q3 international underlying sales up 12 pct

* International growth led by Britain, Mexico, Brazil

* British unit Asda Q3 underlying sales up 5.6 pct

* Asda, Tesco lock horns on pre-Christmas price cuts

(Adds Wal-Mart, Asda, Tesco comment, more detail, background)

By Mark Potter

LONDON, Nov 12 (Reuters) - Wal-Mart Stores Inc (WMT.N), the world's biggest retailer, posted a 9 percent rise in quarterly underlying profit at overseas businesses, outperforming its U.S. operations with strong growth in Britain, Mexico and Brazil.

Asda, the British business, and larger rival Tesco (TSCO.L) also traded blows on price cuts heading into the key Christmas selling season, which Asda finance chief Judith McKenna warned could be the most competitive for a decade. [ID:nLC398949]

Wal-Mart, which serves over 100 million shoppers a year from over 8,000 stores in 15 countries, said on Thursday international operating income at constant exchange rates rose 9 percent to $1.29 billion in its fiscal third quarter.

Overseas sales were up 12 percent on the same basis to $27.9 billion.

"International remains Wal-Mart's fastest-growing segment, with strong sales performances in the United Kingdom, Mexico and Brazil," the U.S. group said.

Wal-Mart, which employs over 2 million people and makes just under a quarter of its sales outside the United States, reported higher group profit for the three months to Oct. 31, but warned fourth-quarter earnings might miss estimates. [ID:nN12404234]

Asda delivered a 5.6 percent rise in sales at stores open at least a year, excluding petrol and VAT sales tax, for the three months ended Sept. 30.

That was down from 7.2 percent growth in its second quarter, but due entirely to a fall in food price inflation, McKenna told reporters on a conference call.

Asda, Britain's second-biggest grocer behind Tesco (TSCO.L), has been gaining market share during the recession.