Best Buy, Sears and J.C. Penney shouldn't pop the Champagne corks just yet
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.