The house rules are simple in this weekly column:

  • I bash a stock that I think is heading lower.
  • I offset the sting by recommending three stocks as portfolio replacements.

Who gets tossed out this week? Come on down, Wal-Mart (NYSE: WMT).

The song remains the same
The Bentonville Behemoth has a problem. Yesterday's quarterly report delivered another stinker at the store level. U.S. comps fell for an insane eighth consecutive quarter.

Apologists will argue that this decline doesn't matter, because Wal-Mart's still finding a way to make the bottom line work. The world's largest retailer remains a master of lightning-quick inventory turns, and no one will ever match its economies of scale.

Wal-Mart has its own excuse -- but you won't believe it. "Our customers are consolidating trips due to higher gas prices," the company explained during yesterday's conference call. Pain at the pump could certainly make drivers want to curb their outings, but I'm still not buying this company line at all. For starters, the spike earlier this year in gas prices doesn't explain the seven quarters of negative same-store sales before that.

The competition's also doing notably better. TJX (NYSE: TJX) -- the thrifty apparel retailer behind T.J. Maxx and Marshalls -- also posted its quarterly results yesterday. Comps rose 2% for TJX. Kohl's (NYSE: KSS) came through with positive comps last week, raising its earnings guidance for the fiscal year. Few other players in economically priced apparel are blaming gas prices for any woes, beyond Wal-Mart.

There's more to Wal-Mart than clothing, of course. Folks still come to the superstore chain that Sam Walton built for groceries, electronics, and media. Food sales are holding up, but we've seen the decay of the giants of consumer electronics. All of the space that Wal-Mart now devotes to selling books, DVDs, video games, and CDs will grow smaller as digital delivery takes over.

Wal-Mart can learn a lot from Sears Holdings (Nasdaq: SHLD). Sears has posted negative comps on an annual basis over the past decade. I'm sure it had plenty of valid excuses at first, but they dried up after investors stopped believing them.

I believe this is the beginning of a gradual fade for Wal-Mart. In time, the early symptoms will grow obvious. It failed to recognize the impact of e-commerce specialists (especially in a time of pesky gas prices). Wal-Mart responded too slowly to the digital revolution. It never had a lick of fashion sense. It never found a marketing team able to spin the Wal-Mart shopping experience as anything other than an excuse to snag goods for dirt cheap prices.

I realize that Wal-Mart is a popular recommendation across many of our newsletter services, so I'd love to be wrong in this prediction. It would be great to see Wal-Mart turn things around, or at least fade away slowly enough to make current investors a fair deal of money. And in fairness, the company has been no slouch abroad.

However, every passing quarter here in the U.S. finds Wal-Mart looking more and more like Sears -- and that's not a pretty transformation.

Good news
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's go over the three fill-ins.

Target (NYSE: TGT)
If driving to Wal-Mart is such a chore, why did rival discounter Target deliver a 2% gain in same-store sales for this morning's quarterly report? The "cheap chic" retailer will never be as big as Wal-Mart, though its empire of 1,755 stores is impressive. It will also never be as cheap. However, Wal-Mart will also never be as cool as Target. Obviously, the store's "Tar-zhay" nickname carries a bit of mockery, but ask any shopper whether it's more embarrassing to shop at Wal-Mart than Target. The bullseye wins, hands down. (Nasdaq: AMZN)
Meet the retailer that's truly eating Wal-Mart's lunch: Amazon. It doesn't operate on the same fiscal calendar, but its latest quarter -- one that overlaps two of the three months in Wal-Mart's period -- saw sales go 38% higher. That said, Amazon has its problems. The site's efforts to champion its Kindle e-reader are taking their toll on its margins. However, when you see consumer electronics and media sales falter at traditional chains, you can blame for siphoning them away. Just wait until Amazon expands its grocery-delivery service outside of select Seattle neighborhoods.

Whole Foods Market (Nasdaq: WFM)
Pundits tend to argue that shoppers who traded down to Wal-Mart for their groceries and other essentials during the economic downturn have now traded back up. This would seem to conflict with Wal-Mart's gasoline theory. However, it's hard to ignore that comps began to turn up at Whole Foods just as Wal-Mart's store-level sales began tanking. Whole Foods is rolling these days, and buying into the organic grocer is as good as wagering against Wal-Mart.

Is Wal-Mart going the way of the dinosaurs, or can the mighty retailer regain its former glory? Take our poll, then share your thoughts in the comments box below.