Why Earnings Season Started Slow (and Macy's Popped While Sears Dropped)

Merry earnings season! Corporate America kicked off its quarterly tradition of releasing its recent financial reports on Thursday -- but low expectations sent the Dow (DJINDICES: ^DJI  ) down for an 18-point loss.

1. Alcoa's earnings include bribery and bad numbers
Just as it does every quarter, coal-mining firm Alcoa (NYSE: AA  ) began the fourth-quarter earnings season after the market closed on Thursday, serving up its financial performance from the last three months of 2013 to the public. After long periods of shrinkage and lost significance, Alcoa was actually kicked out of the elite Dow Jones Industrial Average in September, but its tradition of starting earnings season lives on.
 
So how did Alcoa do? Well the bribery scandal it settled earlier in the day didn't help. The U.S. will stop investigating Alcoa for corrupt bribery charges involving a member of Bahrain's royal family, if it pays $384 million. Alcoa CEO Klaus Kleinfeld asked TV viewers to put the bribery behind them and focus on their earnings that would be released later that evening.
 
As for its earnings, Alcoa's revenues and earnings both dropped last quarter. Alcoa actually lost $2.3 billion, but they like to exclude unusual one-off charges to see what the core business is doing: so Alcoa technically earned $40 million, which amounts to $0.04 for each shareholder (enough to buy a disappointed aluminum Alcoa frowny face pin). With low steel prices hurting Alcoa's business, the stock fell 1.3% before the report and over 3% after.
 
2. Macy's cuts 2,500 jobs, but grows sales
It's a tale of two Macy's on legendary 34th Street. Shares of Macy's (NYSE: M  ) popped 7% on Thursday as investors weighed some good and some bad news from your aunt's favorite department store.

The bad news is that to save $100 million per year, Macy's is slashing 2,500 jobs and closing 5 stores like its snipping down a pair of old jeans to make cutoffs that Britney Spears would proudly strut around Vegas in.

But there was a lot more good news. First, same-store sales grew 4.3% during the crucial November to December holiday shopping period compared to last year -- much better than its competitors who struggled through the season. And second, investors were actually impressed to see Macy's shut down its poor performing stores because the company is essentially trimming its fat. The department store's fake Santas are running the place pretty well this year.
 
3. Sears predicts shockingly bad holiday loss
Not everyone had as fun a day as Macy's. Shares of fellow brick-and-mortar retail mammoth Sears (NASDAQ: SHLD  ) free-fell 15% in after-hours trading Thursday after the company released a report that projected a super bad quarter during the holiday season.

In the details, Sears Holdings is actually made up of iconic brands Sears and Kmart -- and the combo saw sales drops 9% and 6% respectively during the last two holiday months. That's a shockingly big potential $1.35 billion loss when analysts were actually expecting a small gain. Considering the company announced in 2012 that it will close 120 stores to try to save the brand, Wall Street punished Sears quickly for the bummer of a report.

Today:
  • The big December Non-Farm Payrolls Report
As originally published on MarketSnacks.com

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Related Tickers

10/17/2014 4:31 PM
^DJI $16380.41 Up +263.17 +1.63%
DOW JONES INDUSTRI… CAPS Rating: No stars
AA $15.62 Up +1.02 +6.99%
Alcoa, Inc. CAPS Rating: ****
M $56.21 Down -0.36 -0.64%
Macy's, Inc. CAPS Rating: **
SHLD $28.41 Down -1.59 -5.30%
Sears Holdings CAPS Rating: *

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