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Goldman's Un-Gold Earnings, Best Buy's Bad Day, and J.C. Penney Still Not Having Fun

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With the stock market popping to record highs, we were prepared to splurge on some of these fashionable football helmets for the walls of the MarketSnacks headquarters -- but we lost some enthusiasm as the Dow  (DJINDICES: ^DJI  )  dropped 65 points Thursday on some bad earnings from Goldman Sachs (and less cool Best Buy).

1. Goldman Sachs profits drop 19% (so do bonuses)
Goldman profits squeezed in the fourth quarter to $2.3 billion, down 19% from last year. Goldman Sachs (NYSE: GS  ) still beat analysts estimates -- but Big G isn't supposed to shrink... ever. Like your uncle says about his golf game, if it ain't growing, it's dying. GS stock fell 2% Thursday on the news.
There were ups and downs: Investment Banking (think mergers, acquisitions, issuing debt to investors -- and ordering Seamless to your office at 2am) was up, and expenses were down. That's good. But the cornerstone of Goldman's power (i.e. trading) was down 15%. Goldman's stars love to trade bonds, foreign exchange, and commodities, and business was down from last year.
Bonuses are probably going to shrink, and Wall Street will notice. Goldman traditionally pays out the highest levels in the industry, and this year, they're using 36.9% of all revenues to pay people, the lowest level since the crisis began. It's still enough to compensate the average worker $383K, but what will the famous @GSElevator say about this.

2. Bad holiday sales crush Best Buy stock
Holiday sales bombed at Best Buy, and Wall Street is throwing the stock away like a quickly obsolete electronic good (or anything made by Microsoft). Best Buy's (NYSE: BBY  ) stock fell a whopping 29% Thursday after the CEO Mr. Joly -- who was not at all Jolly -- announced that holiday sales were worse than last year's (which were already getting worse).
Best Buy's plan for the '13 holidays was to lower prices and compete with Wal-Mart's lower prices -- but the plan was a disaster. People bought the same amount of electronics; they just paid a lower price. Overall, revenues fell, profits were squeezed, and Best Buy's future was deeply put in question. If lower prices won't lure more buyers in, what will?  
With its new CEO, Best Buy's stock tripled last year with major cost cuts, after many had written off the big-box electronic stores as merely a "showroom" for Amazon customers. This fumbled holiday opportunity erased 28% of those stock gains. Without strong holiday sales, retail stores are doomed.

3. Really bad holiday sales sink J.C. Penney further
Like denim cargo shorts, J.C. Penney is just way, way out of style now. Shares of the struggling department store chain J.C. Penney (NYSE: JCP  ) dropped 1.6% Thursday after announcing it's cutting 2,000 of its 116,00 employees, and closing 33 of its 1,100 stores as part of its big-time, super-duper turnaround plan.

The takeaway is that we all know JCP had a really bad 2013, and the stock is down more than 60% in the last year (it's been trying to rebrand itself since firing former/terrible CEO Ron Johnson). But this latest round of cuts is over holiday sales, which came in well below its optimistic projections. Christmas isn't just fun for stocking toys -- it's when retailers are supposed to make 20%-40% of their annual sales.

  • Housing Starts
  • Reuters/UMich Consumer Sentiment Survey
  • Earnings: Morgan Stanley
As originally published on

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Related Tickers

8/27/2015 4:35 PM
^DJI $16654.77 Up +369.26 +0.00%
BBY $35.80 Up +0.55 +0.00%
Best Buy CAPS Rating: *
GS $189.21 Up +4.81 +0.00%
Goldman Sachs CAPS Rating: ***
JCP $8.47 Down +0.00 +0.00%
J.C. Penney Compan… CAPS Rating: *