The holidays are a festive time of year, but it's not just consumers who are having all of the fun. For many businesses, the holidays are a crucial time of year in industries like retail and beyond. A strong performance during the days between Thanksgiving and Christmas can make the year for these companies, but as competition peaks during the gift-giving bonanza, so does the gap between the winners and losers.
Below are two stocks that blew it this holiday season.
FedEx (FDX 0.18%) has long been seen as a bellwether for the greater economy. Businesses across the spectrum count on the logistics and package delivery giant for its transportation services, but recently FedEx has been stumbling. The stock is down more than 40% from its all-time high in 2018 even as the broader market has been roaring.
Weak financial results and an expanding rift with Amazon (AMZN 2.49%) explain why, and those problems have been exacerbated over the last few weeks. After Amazon ended its contract for first-party deliveries with FedEx this summer, the e-commerce giant made a surprising move by telling its marketplace sellers, who make up the majority of sales on its site, that they were not allowed to use FedEx Ground or Home for Prime deliveries because of its poor on-time delivery record, as reported by The Wall Street Journal.
According to data from ShipMatrix, FedEx's deliveries were on time 90.4% of the time in the week after Black Friday. That compared to a 92.7% on-time rate for UPS and 93.7% on-time for packages Amazon delivered itself.
FedEx dismissed the impact of the move, calling it "minuscule," but it's another eyesore for a company that can ill afford it, especially as Amazon is becoming a force of its own in logistics as it now delivers half of its own orders in the U.S.
The next day, FedEx turned in a disappointing earnings report in which CEO Frederick Smith said fiscal 2020 was a year of "continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season."
The stock fell 10% on the news. Given the spat with Amazon and lower on-time rates, expect FedEx to post another round of weak results when its holiday quarter report comes in.
2. Bed Bath & Beyond
For most retailers, the holiday season is an all-hands-on-deck kind of time. Line workers are putting in overtime, managers are hustling to make sure everything is in order, and executives are doing what they can to maximize profit during the busiest time of year.
So it was especially telling that Bed Bath & Beyond's (BBBY -10.34%) new CEO Mark Tritton fired much of his executive team right in the middle of the holiday season. On December 17, Tritton announced a broad restructuring in the company's executive leadership that included the departure of its Chief Marketing Officer, Chief Merchandising Officer, Chief Digital Officer, Chief Legal Officer, Chief Administrative Officer, and Chief Brand Officer. Of those, the Chief Marketing, Merchandising, Digital, and Brand Officers are likely essential to retail operations, so it's surprising for the home goods seller to dismiss those top executives in the midst of the holiday season.
Though the moves may benefit the company over the long term, they will likely add chaos over the near term, especially during the holiday season. Tritton said interim replacements have been named and the company is searching for a new Chief Merchandising Officer, Chief Digital Officer, General Counsel, and Chief Marketing and Brand Officer.
Bed Bath & Beyond shares actually jumped 11% on the announcement as investors often reacted positively to such a house-cleaning from a turnaround play, but the timing of the move likely reflects continuing struggles from the company during the holidays, so I'd expect another underwhelming quarter when Bed Bath & Beyond reports earnings on January 8.
Tritton, who took over in the beginning of November, promised that the executive restructuring was the first of many important steps the company was taking.
More to come
Keep your eye on retail stocks and related sectors over the coming days, as we'll see a number of reports come out that will move these sector stocks. Shortly after Christmas, we should see updates from industry organizations like The National Retail Federation, giving investors numbers on how the overall industry performed.
In the beginning of the new year, the highly anticipated holiday sales reports from department stores and other major retailers will come out, divulging comparable sales results for November and December.
Hopes are high for a strong holiday season with the stock market at an all-time high and the overall economy remaining strong, but as FedEx and Bed Bath & Beyond show, not every stock will be a winner.