Though it is currently the top grocery store chain in the country, Wal-Mart’s days of being retail champ may be numbered.The stock is down close to 2% after JPMorgan downgraded it from neutral to overweight and said it didn’t expect any major stock boosts to come soon.
Analyst Charles Grom said he sees no signs of anything in the future that would push the stock out of its current trading range of $45-$60. It has been in this range for the last 10 years.
Analysts expect the drivers that produced a less-than-great holiday season, such as low traffic and slow same-store sales growth, to persist over the next year. The company is also trying to get rid of excess inventory and it is apparently slowing down new merchandise orders.
Smaller grocers and dollar stores are also starting to become real competitive threats to the chain and it has not responded adequately, according to Grom. International expansion has also reduced its free cash flow.
JPMorgan lowered its 2011 profit forecasts for Wal-Mart and its price target on shares from $59 to $54. The company’s fourth-quarter earnings are due Feb.22.