Stupidity is contagious -- even respectable companies can catch it. As we do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. In space, no one can hear your stream
Western Digital (NASDAQ: WDC ) updated its set-top streaming player, but there's a surprising omission in the new WD TV player. It plays all of the popular file formats, and being made by a hard drive giant, it will naturally play nice with various sources, including networked computers. However, in a shocking move, it won't support Netflix.
Really, Western Digital? The WD TV is more about playing back your own files, but you can't expect people to buy a set-top box for $100 that doesn't seamlessly stream the leading premium video service. Netflix has 35.7 million subscribers in this country and another 12.7 million members overseas. The worldwide figure grows by the millions with every passing quarter. If Western Digital thinks Netflix isn't important, it's missing the point. If features of the WD TV make it difficult to support Netflix, then those features probably aren't as important as Western Digital thinks.
2. You can't spell Costco without C-O-S-T
Buying in bulk remains fiscally fashionable. Costco's (NASDAQ: COST ) sales climbed 7% in its latest quarter, fueled by a 5% uptick in comps. That's nice to see, especially with many discounters chiming in with negative same-store sales lately. However, Costco will get no love for seeing its earnings climb at half that pace to clock in at $1.07 a share. Analysts were holding out for a profit of $1.09 a share.
This wouldn't be such a big deal if it were a rare miss, but that is just not the case. Costco has come up short of Wall Street's profit expectations for four consecutive quarters. It gets plenty of praise for its lean operations and employee satisfaction, but something just isn't right if analysts keep overestimating the warehouse club's earnings potential.
3. Sea the difference
I took SeaWorld Entertainment (NYSE: SEAS ) to task last week for increasing the prices of its one-day tickets to Sea World Orlando and Busch Gardens Tampa. The 3% increase -- up to a freakishly steep $95 -- didn't make sense in light of sluggish attendance. Turnstile clicks declined 4% last year and plunged 13% during this year's first quarter. Raising admission prices after four consecutive quarters of falling attendance didn't seem like a very smart move.
A caveat in all of this was that a major thrill ride was opening at Busch Gardens Tampa. Unfortunately, the Falcon's Fury drop ride has yet to open. Despite the media event several weeks ago and promotional material throughout Tampa claiming that the ride is open, the theme park operator has run into a few snags. This week, it updated the ride's opening to "later this summer" in a move that will likely eat into attendance through June and possibly eat into the next quarter.
4. You need to earn that ticker symbol
You don't often see Southwest Airlines (NYSE: LUV ) on the wrong end of a deceptive marketing accusation, but that's what happened this week when the low-cost carrier was fined $200,000 for advertising $59 fares for certain routes late last year that never really existed.
Southwest is usually the one calling out the competition for hidden fees. Its "bags fly free" ad campaign takes its airborne rivals to task for not charging what passengers think they will be paying. Whether Southwest is a hypocrite or this was just an honest mistake, it still doesn't look very flattering.
5. Ford tough
It's been a rough year for automakers in terms of having to fix past mistakes, and this week it was Ford (NYSE: F ) announcing several recalls totaling nearly 1.4 million cars being called back to remedy defects.
The biggest issue involves 915,000 Ford Escape and Mercury Mariner cars with a potential issue where the torque sensor in the steering column can result in a loss of electric power steering assist. Recalls naturally cover all cars for unlikely scenarios, but it certainly does rough up an automaker's reputation to have to bring cars into service centers for something it should've gotten right the first time.
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