Shares of grocery retailer SuperValu (NYSE: SVU) have plunged almost 25 percent since mid-October amidst an increasingly difficult environment for food retailers.

In calendar 2010, the stock dropped 24 percent, making it one of the worst performing stocks in the S&P 500 index.

Groceries have been unable to attract more customers who are concerned about the fragile economy and their jobs. As a result, supermarket chains have competed to cut food prices, while the cost of buying food from suppliers has been rising.

SuperValu in particular has struggled to turn the corner in its various businesses, while customer traffic declines steadily.

The traditional grocery stores are now also facing competition from discount shops like Wal-Mart (NYSE: WMT), Target (NYSE: TGT) and Costco Wholesale (Nasdaq: COST) which sell a wide variety of foods.

SuperValu has been hit with one bad news after another.

In an effort to cut costs, the company just announced it will close twenty underperforming stores in New England, Philadelphia and the West Coast.

In Chicago, its Jewel-Osco unit is offering all of its corporate employees unpaid time off between now and February 26. The offer extends to all SuperValu chains, including Save-a-Lot, Acme, Cub and Albertson’s.

A recent report from SmartTrends indicated that SuperValu has relatively low future earnings growth potential within the food retail industry.

On Tuesday, Morgan Stanley analysts downgraded SuperValu shares to “underweight” from “equal weight”, citing that the company’s price reductions will squeeze profit margins. Analyst Mark Wiltamuth also sharply cut earnings estimates for the company through 2013.

An analyst BMO Capital also downgraded SuperValu stock and cut earnings estimates.

SuperValu and its grocery chain peers are likely to endure another difficult period this year.

Morgan Stanley Nyse Retail Wal-Mart