1. Best Buy (NYSE: BBY) recently released earnings and they were much worse than Wall St. expected. Net income fell to $177 million, or EPS of $0.47, for the quarter ended Aug. 27, down from $254 million, or EPS of $0.60, last year. Analysts expected EPS of $0.52, according to a survey by FactSet. Best Buy dropped its forecast for the balance of the year. It took the action because of concerns about TV and phone sales, along with worry about the economy. Best Buy has had a string of earnings failures, due primarily to its failure to do well online. Best Buy recently said its website would carry items from third-party stores to expand its attraction to shoppers. This did nothing to improve the perception that investors have of the company. Fitch downgraded Best Buy in June. The company’s shares are off 30% in the last year. Shares of rival Amazon (NASDAQ: AMZN) are higher by 60% for the same period
2. Research In Motion (NASDAQ: RIMM) posted earnings recently that show its sharp decline has accelerated. Several analysts now believe the RIM BlackBerry smartphone will be no more than a “niche” product in a market it controlled almost completely four years ago. The bad earnings news took shares down from $29.54 to $23.93 in one day. RIM’s stock is off almost 50% in the past year, while shares in rival Apple (NASDAQ: AAPL) are higher by more than 40%. RIM shipped only 200,000 units of its PlayBook tablet PC last quarter. Expectations had been for a number more than three times that. RIM revenue fell by 10% in the most recent period to $4.2 billion — a horrible situation for a company that was one of the most well-known growth stories for five years. EPS fell to $0.63 from $1.46. The consensus among the media and Wall St. is that RIM has almost no chance to recover. The company has already started to cut costs. It said in July it would lay off 10.5% of its workforce.
3. Talbots (NYSE: TLB) shares traded above $17 in May a year ago. They now trade at $3 after dipping to $2.25 recently. After the company released earnings two weeks ago, research firm Sterne Agee downgraded the stock to “neutral” from “buy.” And the retailer posted results that were worse than expected. The corporation’s quarterly loss from continuing operations was $37.4 million, or $0.54 per share, compared to last year’s income from continuing operations of half a million, or $0.01 per share. The failing retailer said it expects to close about 110 stores in total, including 15 to 20 consolidations, through fiscal 2013. The corporation’s chief creative officer, Michael Smaldone, was fired as earnings were announced. Oddly, Talbots did not have a replacement when it took this action.
4. Hewlett-Packard (NASDAQ: HPQ) announced earnings on August 18 and its shares promptly dropped to a 5-year low. HP also revised earnings forecasts down. Management said it may spin off the firm’s PC division, the largest in the world. So far, there are no takers. HP also discontinued it Palm operating system, which it bought only a year ago, and its tablet PC product. Investors believe, almost universally, that CEO Léo Apotheker does not have the strengths of his predecessor Mark V. Hurd, who was pushed out for ethical lapses. Wall St. seems certain that HP will lay off more people in addition to the sharp cuts it made in 2009 and 2010. It is generally accepted by analysts who cover the company that it has begun to lose the battles against Dell (NASDAQ: DELL), Oracle (NASDAQ: ORCL), and SAP (NYSE: SAP)
5. The U.S. Postal Service may be more troubled than any large public company in America. The organization said it may lose as much as $10 billion this year. It teeters on the brink of insolvency. Its workers’ compensation liability is more than $12 billion. The USPS management has suggested it shutter thousands of individual post offices, layoff as many as 200,000 workers, and close over 250 service centers. Another suggestion by management is that delivery be cut to five days a week. The rise of the use of e-mail and private air freight companies Fedex (NYSE: FDX) and UPS (NYSE: UPS) has doomed the old post office model. No one should expect that the suggestions of executives at USPS will go unchallenged. The American Postal Workers Union most likely will strike to fight the job cuts. Individual Congresspersons will press to keep offices open in their districts.
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