Wall Street had a minor celebration on Wednesday as investors reacted positively to good news from key retailers in the department store and home improvement areas. Signs that the consumer economy in the U.S. remains strong were encouraging, especially as market participants wait to see how much the Federal Reserve might try to help bolster economic expansion. Yet some stocks missed out on the rally. Cree (NYSE:WOLF), MSG Networks (NYSE: MSGN), and Children's Place (NASDAQ:PLCE) were among the worst performers. Here's why they did so poorly.
Cree deals with a tough industry environment
Shares of Cree fell 16% after the maker of LEDs and other electronics components gave a somewhat disappointing outlook in its fiscal fourth-quarter financial report. Fundamentally, the company managed to outpace what most people had expected to see, but sales declines of 5% stemmed largely from a 25% drop in revenue from its LED segment. Earnings were also down from year-ago levels. More discouraging was Cree's outlook, in which it said that trade-related pressures on major customer Huawei and weak LED demand would persist into the current quarter. Although long-term investors are used to the cyclical nature of Cree's business, it's still tough to see the company suffer a lengthy slowdown.
MSG Networks just can't win
MSG Networks saw its stock sink more than 12% in the wake of some troubling numbers in its fiscal fourth-quarter results. Revenue eased downward by 2% year over year, and net income fell at a steeper 9% pace. MSG Networks faced a significant drop in subscriber counts, due in large part to poor performance from some of the major sports franchises that the media company features. CEO Andrea Greenberg tried to remain optimistic, pointing to new advertising opportunities and a stronger programming lineup, as well as good relations with affiliates. Yet even Greenberg acknowledged that the media industry is in flux, and it'll take high-value content for MSG Networks to keep up with its sports entertainment competitors.
Children's Place lags fellow retailers
Finally, shares of Children's Place lost 2.5%. On a generally strong day for retailers, the kids apparel specialist's second-quarter results seemed a bit out of sync with the rest of the industry, as it saw revenue sink more than 6% from year-earlier numbers on a 3.8% drop in comparable retail sales. Net income fell more than 75% on an adjusted basis, and the company also warned that earnings for the full year would be significantly weaker than previously anticipated. Store closures continued during the period, and investors still seem nervous about whether the upcoming relaunch of the Gymboree brand will be as successful as CEO Jane Elfers and her executive team hope.