Goldman Gloomy on Wal-Mart

The company has long attributed its weak same-stores sales to high gas prices, which weigh particularly hard on its lower-income customer base. But Shapira noted in her report that customers who opted to shop at their local supermarkets and drugstores when gas prices spiked, rather than driving the extra miles to a Wal-Mart, don't seem to be returning now that gas prices have eased.

Shoppers "liked what they found [at their local supermarkets and drugstores] in terms of prices, convenience and store environments," said Shapira.

In order to shore up its battered public image, Wal-Mart has launched an expensive public relations campaign to tout its positive contributions to society. It also has remodeled stores and revamped its product offerings to appeal to a higher-income customer, but so far hasn't had much luck in attracting these shoppers away from its trendier rival, Target(TGT Quote).

"Wal-Mart's strategic focus has become less clear as current initiatives have not seemed to gain traction," said Shapira. "Will Wal-Mart continue to target incremental sales from higher-end consumers? Or, will the company go back to its roots to reinforce its pricing message? Right now, it's straddling the fence -- attempting to do both without much success."

She said the company's strategic confusion opens the door to changes in leadership.

"There are clear voids in marketing, and merchandising missteps suggest the need for some new talent," said Shapira. "More leadership change means more strategy change, which all adds time to the turnaround."