Wall Street’s valentine to Wal-Mart Stores Inc. was of the “I think we’d be better off as friends” variety.

This story first appeared in the February 15, 2011 issue of WWD. Subscribe Today.

J.P. Morgan analyst Charles Grom downgraded the discount giant’s stock to “neutral” from “overweight” Monday and said the recent deterioration in its U.S. comparable-store sales might be “a secular problem that could last multiple years.”

Grom’s downgrade amounts to a piling on: Goldman Sachs and UBS already had cut the stock to “neutral” this year. Investors inched away from the retailer — which performed well during the recession — and pushed its stock down 1.6 percent to $54.80 Monday.

Wal-Mart’s flagship U.S. business is still trying to find its groove in a recovering economy. Bill Simon, who has led the division as president and chief executive officer since June, reversed Wal-Mart’s move to slim down its offerings and installed a new management team.

But comps at the chain fell 1.3 percent in the third quarter and analysts are bracing themselves for fourth-quarter results next week.

“We don’t think Wal-Mart had a great holiday season and, if anything, believe the comp trend became sequentially worse as the quarter progressed,” Grom said. “Equally troublesome, we’re increasingly concerned that many of the key culprits behind the unfavorable trends — i.e. traffic, lost share in key consumable categories and discretionary weakness — are likely to persist in 2011.”

Grom said Wal-Mart’s shifting strategies might have alienated and confused its core shoppers and that it wasn’t moving quickly enough to fend off niche grocers and dollar stores.

If its very public exercise in assortment optimization — removing about 2,000 stockkeeping units from shelves and, after complaints from consumers, putting many of them back — taught Wal-Mart anything, it’s that it needs to have a better handle on what customers want. Wal-Mart on Monday named Cindy Davis executive vice president of a newly created global consumer insights team, charged with helping Wal-Mart and Sam’s Club understand broad consumer trends. Davis, who was executive vice president of Sam’s Club, will continue to report to Brian Cornell, president and ceo of Wal-Mart’s membership club division.

Last week, UBS analyst Neil Currie lowered his fourth-quarter comp outlook for Wal-Mart’s U.S. stores to a decline of 0.8 percent from a gain of 0.3 percent. And — in what might be an attempt to flex its muscles in Wall Street’s ongoing battle for technological superiority — noted, “Our proprietary satellite parking lot analysis indicates the outcome could be even lower.”

In January, Goldman analyst Adrianne Shapira said consumers were “balancing frugal with frivolous” and upgraded Target Corp. to “buy” from “neutral,” while downgrading Wal-Mart. She said Target and Wal-Mart likely would perform better this year, but that Target was better positioned to gain from a middle-class economic rebound.

Shapira also noted that over the past decade, Wal-Mart’s stock has only outperformed the S&P 500 during recessions.

Wal-Mart’s drop Monday helped pull the Dow Jones Industrial Average down 5.07 points to 12,268.19. The S&P Retail Index fell 0.2 percent, or 1.08 points, to 523.20.