NEW YORK (CNN/Money) - Wal-Mart Stores Inc. and Federated Department Stores Inc. each reported disappointing Easter sales last week, and though Wal-Mart still anticipates higher March sales, Federated said it would probably miss expectations.

In its weekly pre-recorded sales announcement, Federated said lower-than-expected sales last week would drag its March sales at stores open at least a year, a key retailing gauge called same-store sales, below forecasts for a flat-to-1-percent decline.

Meanwhile, Wal-Mart said stormy weather and the early Easter holiday hurt its same-store sales last week. The company also said that March same-store sales remain on track for an 8 percent to 10 percent increase from a year ago, and first-quarter sales are expected to come in at the high end of its 5 percent to 7 percent forecast. April same-store sales growth is expected to reach the low-to-mid-single-digit range.

The reports from Wal-Mart and Federated illustrate consumers' ongoing shift to discount chains like Wal-Mart and away from traditional department stores, which are typically more expensive.

The sales reports came as Merrill Lynch downgraded several retailers, including Federated, saying investors are more likely to shift to manufacturing stocks as the economy continues to improve.

Additionally, UBS Warburg lowered its ratings on Wal-Mart Stores Inc. (WMT: down $1.74 to $59.56, Research, Estimates), which overtook Exxon-Mobil Corp. (XOM: unchanged at $43.83, Research, Estimates) as the world's biggest company this year. Discount chains copped market share from department stores last year as recession-wary consumers hunted for bargains. UBS lowered Wal-Mart to "buy" from "strong buy" with a $70 stock price target.

The downgrades come as analysts and economists realize that the resiliency of consumers during the recession means they do not have the pent-up demand that usually follows a downturn. They will likely continue spending, but not at the breakneck pace they did during the last economic expansion.

"It is a coming back down to earth," Kurt Barnard, president of Barnard's Retail Consulting Group, said of the downgrades. "About two or three months ago, the world was swept up by the notion that the economic recession is over and the good times are rolling again. That meant consumers would be knocking down the doors of retailers the way they did a few years ago. But guess what? It ain't happening."

Though Wal-Mart is still expected to outperform other retailers, UBS said it expects the entire retail sector to perform in line with the broader market, rather than exceeding it, which prompted the downgrade.

"We don't see any near-term negative catalysts for the stock, but our $70 price target, which implies 14 percent upside potential, is more consistent with a 'buy' than a 'strong buy,'" UBS retail analyst Linda Kristiansen said in a research note Monday.

Kristiansen expects Wal-Mart's sales to increase in the low double-digits this year, while inventory is expected to rise just 4 percent, indicating strong expense control and company management.

Meanwhile, Merrill lowered its intermediate-term rating on Federated Department Stores t (FD: down $1.54 to $39.31, Research, Estimates)o "neutral" from "strong buy" because of discount-chain competition and the more moderate sales environment expected by analysts.

The firm also changed its intermediate outlook to "buy" from "strong buy" on Barnes & Noble Inc., (BKS: down $0.94 to $30.05, Research, Estimates) Target Corp. (TGT: down $0.27 to $42.85, Research, Estimates) and Wal-Mart. It lowered Lord & Taylor parent May Department Stores (MAY: up $0.16 to $35.01, Research, Estimates) to "neutral" from "buy." It also downgraded Dillard's (DDS: down $0.64 to $23.22, Research, Estimates) to "sell" from "neutral."

Merrill said in a research note Monday that the recuperating economy would lead investors to shift away from retail and into manufacturing stocks. However, retailers should move higher at the end of the year.

Supporting that view, the nation's manufacturers reported the second straight month of growth Monday, following 18 months of contraction, pointing to an overall economic recovery.

April typically is one of the most sluggish months for retail because spring merchandise already has been on the shelves for weeks and summer items have not yet been fully rolled out. But positive indicators for the economy point to generally stronger sales and profits for the nation's retailers compared with a year ago, even though stocks are expected to turn in a more moderate performance than in recent months, analysts said.

"While retailing stocks may no longer lead the market, they should be carried along with it, assuming the stock market is higher at year-end as we expect," Merrill said. "Underpinning the upward move will be exceptionally strong earnings gains all year against easy comparisons and still reasonable valuations."

Though department stores are expected to benefit from the improving economy, they still continue to struggle amid fierce competition from discount chains.

Separately, Merrill also downgraded Jones Apparel (JNY: down $0.65 to $34.30, Research, Estimates) andPolo Ralph Lauren (RL: down $0.98 to $28.20, Research, Estimates) to "buy" from "strong buy," mainly on valuation. The firm also lowered children's apparel retailer Gymboree (GYMB: down $0.13 to $14.62, Research, Estimates), youth-oriented apparel chain Pacific Sunwear (PSUN: unchanged at $24.60, Research, Estimates), Ross Stores (ROST: down $1.78 to $36.05, Research, Estimates) and Too Inc. (TOO: down $0.74 to $28.75, Research, Estimates)