Stupidity is contagious. It gets us all from time to time, and even respectable companies can catch it. As I do every week, let's take a look at five head-spinningly dumb financial events from the past seven days.
1. Made-in-American Idiot
Green Day's new CD debuted at the top of the charts this week, but don't go looking for 21st Century Breakdown at Wal-Mart (NYSE: WMT). The discount department store chain won't stock discs that have parental advisory stickers for explicit lyrics, and Green Day won't put out a censored version of its CD.
Can the world's leading seller of CDs really refuse to stock an album that sold more than 200,000 copies in its first week?
More to the point, isn't Wal-Mart being hypocritical here? You can buy Grand Theft Auto IV or any of last year's R-rated flicks at your local Wal-Mart. Isn't a parental advisory sticker the equivalent of an M-rated video game or an R-rated DVD? I would argue that plenty of media products on the Bentonville behemoth's shelves are far more objectionable than Green Day's CD.
2. Walls close in on a small-box retailer
GameStop (NYSE: GME) had a good run last year, but 2009 is proving to be a harder level to beat. The video game retailer posted fiscal first-quarter results that were in line with expectations yesterday morning. Unfortunately, its current-quarter prognosis isn't as encouraging.
GameStop sees comps falling by 8% to 11% during the quarter, with earnings falling short of both the $0.34 a share it earned a year ago, and the $0.40 a share that analysts were banking on.
The company's cheery guidance for the second half of the year almost makes things worse. Sure, it would be great if GameStop grows its bottom line this year by 18% to 22%. However, after watching profits climb just 13% in the first quarter, with a possible decline waiting in the second quarter, investors should exercise caution before popping the cork on the bubbly.
3. Doesn't it just depress you?
Another hot retailer coming to a grinding halt is Hot Topic (Nasdaq: HOTT). The specialty apparel chain struck a counterculture chord last year, as Twilight fans flocked to its stores for dark clothing and film-related branded merchandise.
Alas, its fashions apparently don't have a vampire's ageless longevity. Like GameStop, Hot Topic is also warning of a sharp drop in comps during the current quarter. True, retailers aren't doing so well right now, but chains like GameStop and Hot Topic had previously managed to buck the trend, even during last year's brutal holiday season.
4. Napster up to its old tricks
Remember when Napster was an illegal peer-to-peer song-swapping service, disrupting the music industry by offering a cheaper alternative than the market's other offerings? Well, the original music maverick is at it again. Now under Best Buy's (NYSE: BBY) umbrella as a legal music-subscription service, Napster is offering unlimited streams to users' PCs (plus five MP3 downloads) for just $5 a month.
This is a gutsy move for Best Buy. It's also bad news for Apple's (Nasdaq: AAPL) iTunes Music Store and Microsoft's (Nasdaq: MSFT) Zune Pass. After all, five bucks is what it would roughly cost you to download five songs through most digital storefronts like iTunes. The unlimited streaming takes a shot at similar services like Zune Pass and Rhapsody, which offer greater portability of the music -- at three times the price.
This also doesn't bode well for record labels trying to increase their pricing power, or for Internet radio upstarts aiming to either charge for their broadcasts or subsidize them through ads.
5. Stop following the Hurd
I guess Hewlett-Packard (NYSE: HPQ) CEO Mark Hurd's milking hands have finally tired out. The turnaround whiz has worked wonders at HP since taking over for Carly Fiorina a few years ago. He has been able to consistently beat analyst guesstimates, primarily by squeezing more out of the tech bellwether's margins.
Well, we may be near the ceiling (or floor, depending on which way you're holding your metaphors) of his abilities. H-P's latest earnings fell 13% to $0.70 a share, on a more modest 3% dip in revenue. The top-line dip would have been more noticeable if not for the company's recent EDS acquisition.
Hurd isn't ready to retire his milking gloves. "We've identified additional annual savings of approximately $500 million, beginning in 2012," he said during the company's conference call.
I'll believe that when I see it. Pointing to synergies that won't be realized for another three years sounds overly confident for a company coming off an uninspiring quarter.
Let's beat the dumb drum:
© 2009 UCLICK L.L.C.