Best Buy, Sears and J.C. Penney shouldn't pop the Champagne corks just yet
Best Buy, Sears and J.C. Penney shouldn't pop the Champagne corks just yet
Shares of Best Buy (BBY), Sears Holdings (SHLD) and J.C. Penney (JCP) are on the move today after reporting results that weren't as awful as Wall Street had predicted.
Unfortunately, expectations for all three companies weren't that high and the results weren't great.
"The expectations were a joke," said Brian Yarbrough, an analyst at Edward Jones who covers the retail sector, in an interview.
One weakness for Best Buy and Sears is same-store sales -- a key retail metric measuring activity at locations open at least a year that are also called "comparable sales." At Sears, they fell 6.4 percent on a companywide basis while domestic same-store revenue at Best Buy dropped 1.2 percent. The story is different at J.C. Penney, which posted a 2 percent gain, its first since 2011. It expects comparable sales to increase 5 percent during the current quarter. Investors cheered the news and a bullish company forecast, pushing shares of the Plano, Texas-based company up 25 percent to $7.47.
Sears Holdings, which is controlled by billionaire Edward Lampert, posted a loss of $358 million, or $3.37 per share. Revenue plunged 14 percent to $10.6 billion. J.C. Penney eked out a profit of $35 million, or 11 cents per share, while sales fell 2.6 percent to $3.78 billion, below the $3.86 billion analysts' had forecast. Excluding one-time items, J.C. Penney lost 68 cents per share, less than the 86-cent loss analysts had expected.
Best Buy earned $310 million, or 88 cents a share, reversing a year-earlier loss, as the largest consumer electronics chain benefited from cost cuts implemented by Chief Executive Hubert Joly. Excluding one-time items, profit was $1.24, surpassing the $1.10 Wall Street analysts expected. Sales fell 3 percent to $14.47 billion, lagging analysts' forecasts that expected $14.66 billion.
Shares of Hoffman Estates, Ill.-based Sears climbed 8 percent to $43.65, as investors were heartened to see that the company's cash reserves were $1 billion as of the end of the year thanks to asset sales undertaken by Lampert. In a letter to shareholders, the hedge fund tycoon struck a confident note.
"Furthermore, if the way the entire American retail industry ended 2013 is any indication, I believe 2014 may well be a year in which Sears Holdings begins to clearly demonstrate the advantages of this transformation," he wrote in a letter sent to shareholders.
Under CEO Hubert Joly, Best Buy has begun competing more aggressively with rivals such as Amazon.com (AMZN) on price. He also is in cost-cutting mode and plans to pare expenses by $1 billion on an annualized basis. The New York Post recently reported that the Richfield, Minn.-based company plans to cut 2,000 managers.
"The jury is still out on Best Buy," said Yarbrough, who rates Best Buy as a "hold" and doesn't officially cover Sears and J.C. Penney. "Their biggest competitor (Amazon) doesn't care about profit."
Best Buy rose 3.5 percent to $26.74.