When Walmart (WMT) earnings land on Thursday, it’s not going to be pretty.

The struggling retailer is forecast to post a year-over-year decline in profits, and some analysts feel certain WMT will miss Wall Street already downbeat estimates. Don’t be surprised if an already substandard year for Walmart stock takes a turn for the worse.

From problems in the executive ranks to competition to an economic recovery that’s not helping its shoppers, Walmart earnings are only going to show more pain.

For one thing, the head of Walmart’s U.S. business — the most profitable division by far — stepped down last month. That would only happen if the quarter was shaping up to be another lemon for WMT U.S.

Then there’s the problem that consumers are looking for convenience and value, according to research from Goldman Sachs. Big box stores like Walmart lose on the convenience front, and don’t well enough against the dollar stores on value either.

Finally, as we’ve written before, the recession never really ended for Walmart because it never really ended for its huge base of lower-income consumers. Joblessness, low wages and a lack of job security have Walmart shoppers making fewer trips to the chain, and then spending less when they get there. Always-low prices don’t move merchandise when they’re still out of shoppers’ reach.

Walmart Earnings Doomed by U.S.

The long-standing weakness at WMT U.S. looks ready to boil over when Walmart earnings hit later this week. Brian Sozzi, chief equities strategist at Belus Capital Advisors, has a “sell” rating on WMT stock. As the analysts writes in a client report, the merchandise is piling up faster than WMT can move it:

“Given our observation of an increased number of clearance zones at numerous stores, and rising amounts of excess seasonal goods on markdown as the second quarter moved along, Walmart is at risk of missing second quarter consensus earnings per share forecasts.”

And that forecast is already a downer for anyone holding WMT stock. Earnings per share are projected to fall to $1.21, down from $1.24 in last year’s second quarter, even as revenue inches up 1.7% to $118.98 billion.

Higher sales and lower profit can only mean one thing — margin compression. Given WMT’s inventory woes, that comes as no surprise. Here’s Sozzi again:

“Inventory growth continues to outpace net sales growth in the U.S. division, a major problem we have frequently highlighted as indicating the company being out of touch with the financial struggles of its core U.S. consumer.”

Walmart grew to be the world’s largest retailer by being finely attuned to the needs and struggles of its core customers, but at some point over the last five years it lost its way. Whether it was going tit-for-tat with dollar stores on price, or trying to be more like Target (TGT) with its image, Walmart just isn’t as necessary as it once was.

WMT stock is already off 5.7% for the year-to-date, underperforming the broader market by about 10 percentage points. Thursday’s report won’t reverse the slide. If anything, WMT earnings are likely to make it worse.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.