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Why SolarCity, Genesco, and Shoe Carnival Slumped Today

By Dan Caplinger – Sep 1, 2016 at 5:49PM

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Even though the market held up well, these stocks sagged. Find out why.

Image source: SolarCity.

Thursday was a quiet start to the month of September for the stock market. The S&P 500 finished almost flat, while the Dow Jones Industrials picked up about a tenth of a percent after having spent much of the day in negative territory. Oil prices once again sagged, falling below the $43.50 per-barrel mark, and calling into question some of the positive movement that the energy sector has posted over the past few months

In general, though, healthy levels of economic activity prevented any market declines from being pronounced. Still, some individual stocks suffered, and among the worst performers were SolarCity (SCTY.DL), Genesco (GCO -0.26%), and Shoe Carnival (SCVL -0.76%).

SolarCity comes out of the sun

SolarCity finished the day down 9% after the residential solar specialist revealed troubling news in connection with its proposed merger with Tesla Motors (TSLA -1.55%). As part of disclosure filings that the companies made, SolarCity revealed that it has had difficulty in raising the cash it needs to move forward with its expansion plans to get more customers to install solar power systems in their homes.

With extensive debt, any disruption in capital availability for SolarCity could be disastrous, and that has some Tesla investors once again questioning whether the fact that Elon Musk is the largest shareholders of both companies might have created conflicts of interest that aren't in Tesla's best interests. If the Tesla deal doesn't go through, many SolarCity investors worry that high rates of cash usage could threaten the solar giant in the near future.

Genesco journeys lower

Specialty retailer Genesco plunged by nearly a third after reporting its fiscal second-quarter results. The company said that adjusted earnings from continuing operations fell by almost a fifth, to $6.9 million, and net sales dropped by 4.6%. Comparable sales were down 1%, including a 4% drop in its Journeys group of stores that offset relatively flat performance at Schuh and Lids Sports, and a 3% rise at the Johnston & Murphy dress-shoe group. In addition, CEO Robert Dennis said that the current quarter has gotten "off to a difficult start," with comps down 5% through Aug. 27.

As a result, Genesco cut its earnings range for the full year by nearly $1 per share, to between $3.80 and $4 per share. Despite the CEO's confidence that Genesco can bounce back, the retailer seems to be facing even worse conditions than most of the rest of the industry, and it will take a strong holiday season to convince investors not to be worried about the long run.

Shoe Carnival slips and falls

Finally, Shoe Carnival dropped 12%. The shoe retailer said that revenue and earnings came in lower than most investors had expected, with a tepid comparable-store sales increase of 0.5% reflecting the difficulties that the industry is facing. The company said that its non-athletic footwear categories performed reasonably well, and the Shoe Carnival loyalty program was helpful, as well.

Still, comps for the full year are expected to be up just 1.5% to 2%, and much of the earnings-per-share growth that Shoe Carnival has produced is coming from stock repurchases. Until the fundamental picture for retail gets better, Shoe Carnival and its peers are likely to remain under some pressure going forward.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends SolarCity and Tesla Motors. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

SolarCity Corporation Stock Quote
SolarCity Corporation
Tesla Stock Quote
$179.62 (-1.55%) $-2.83
Shoe Carnival Stock Quote
Shoe Carnival
$24.87 (-0.76%) $0.19
Genesco Stock Quote
$43.59 (-0.26%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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