Thursday saw another up-and-down session on Wall Street, but bullish investors got the final word, as the Dow Jones Industrial Average finished with triple-digit gains and other major benchmarks posted even stronger advances on a percentage basis. After initially losing ground on continued worries about the staying power of the economic recovery, stocks pushed into positive territory as market participants got more optimistic about a potentially favorable resolution to trade disputes. However, some stocks still posted substantial losses. KB Home (KBH -1.22%), Dillard's (DDS 0.89%), and NetApp (NTAP -1.76%) were among the worst performers on the day. Here's why they did so poorly.
KB Home cautions investors
Shares of KB Home dropped 15% after the company warned that its fiscal fourth-quarter financial results would likely be worse than originally expected. The homebuilder blamed reduced deliveries in the key Texas market as well as delays in closings in California due to extensive wildfire activity there. The company cut its revenue guidance by $80 million to $110 million to a new range of $1.31 billion to $1.34 billion, and a number of Wall Street analysts responded by reducing their ratings and price targets on KB Home stock. With interest rates on the rise, many are concerned that the housing market could be on the verge of a downturn for the first time in years, and that would hurt not only KB Home but its homebuilding peers as well.
Dillard's stock fell 15% in the wake of the department store retailer's release of its third-quarter financial report. Dillard's reported a 3% rise in comparable sales, but massive markdowns weighed on profit margin, resulting in a nearly 50% drop in net income compared to the year-ago quarter. Coming in the aftermath of other retail giants seeing similar pressures, Dillard's decline is symptomatic of a broader concern among investors that the retail segment isn't at its best right now. Given that the crucial holiday season is already upon us, it's not ideal that Dillard's and its peers are struggling despite encountering reasonable favorable economic conditions in the U.S. market.
NetApp can't meet expectations
Finally, shares of NetApp lost 12%. By most accounts, the data storage specialist had good performance during its fiscal second quarter, seeing overall revenue rise 7% on an 11% rise in product sales. Adjusted earnings per share jumped more than 30% from year-earlier levels, and CEO George Kurian pointed to "a tremendous amount of innovation across our portfolio that helped us drive share gains, expand our available market, and set the industry agenda." Yet investors seemed to focus on the potential for gross margin levels to fall in the coming quarter. With the data storage industry at a crossroads right now, it's uncertain whether NetApp will be able to bounce back quickly or face further losses after a strong showing throughout most of the past year.