Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Penney candy
Was there ever any doubt that bringing back free haircuts for kids on Sundays in November wouldn't save J.C. Penney (JCP +0.00%) from a horrendous holiday season?
After all, how much spending money does a shopper have if they choose to drag kids into a J.C. Penney salon for a long line of children angling for pro bono crops?
If I can lift my own tweet from Wednesday night, CEO Ron Johnson's makeover is going over as well as bubblegum Botox. The struggling department store chain posted a mind-boggling 31.7% plunge in same-store sales for its January quarter.
Let's check the comps scorecard on Johnson's performance since introducing his new sales- and coupon-free remodeling of J.C. Penney.
| Quarter |
Comps |
|---|---|
|
Q1 2012 |
(18.9%) |
|
Q2 2012 |
(21.7%) |
|
Q3 2012 |
(26%) |
|
Q4 2012 |
(31.7%) |
Source: J.C. Penney.
This is a mess. Sure, the comparisons will get better now that J.C. Penney is stacked up against its own incompetence from 2012, but it just goes to show that scoring a hit with Apple Store doesn't make you a mass merchandise guru.
2. Pandora's box houses a miniature toll collector
Music-streaming data hogs are on notice.
Pandora's (P +0.00%) moving to cap free ad-supported streaming of its popular music discovery service at 40 hours a month through mobile devices.
Some may argue that the move is long overdue. Spotify hasn't had a problem getting music fans worldwide to pay up for its service, so why should Pandora's heaviest users get a free ride? As music royalty rates escalate and advertisers fret about the efficacy of online audio ads, why shouldn't Pandora beef up its subscription revenue?
Well, for starters, charging just $0.99 for the month that a listener goes over 40 hours isn't going to be a big moneymaker. If anything, it may dissuade usage, even from those who can probably pay for premium service or those who probably wouldn't have bumped up against the ceiling in the first place.
The timing is lousy. Pandora's still posting healthy year-over-year growth, but January saw a sequential dip in active listeners to 65.5 million. This isn't the time to rock the boat, especially when some tech giants may be ready to jump into this market.
3. The fall and fall of Groupon
Shares of Groupon (GRPN +8.48%) tumbled 24% yesterday, and it's not the only thing falling at the daily-deals leader.
Consumers and merchants alike are losing interest in the traditional prepaid vouchers for discounted meals, spa treatments, and local experiences.
Back out Groupon's direct revenue -- the low-margin money it started making over the past year by selling clearance-bin merchandise -- and its business is going the wrong way. Nondirect revenue clocked in at $413.1 million during the quarter, 14% below the prior year's $478.5 million and even below the third quarter's $423.6 million.
Merchants are also scaling back, and that has led Groupon to discount its services by taking a smaller percentage of the vouchers.
The market's shocked with Groupon's surprising quarterly loss, but the real story here is its eroding model.
The board's move to boot CEO Andrew Mason after Thursday's market close is a bold move, but it doesn't matter who was running Groupon. The flash-sale business model is dead.
4. Books getting burned
Barnes & Noble (BKS +0.00%) has a problem, and it's bigger than sliding sales at its flagship bookstores.
Yes, retail sales fell a surprising 10% at Barnes & Noble's retail business, but the real shock here is that its money-losing Nook business plunged a staggering 26%. Adding insult to injury, the Nook's EBITDA loss more than doubled during the quarter.
I guess we're starting to learn why founder Leonard Riggio announced earlier this week that he plans to make an offer for just Barnes & Noble's retail book business. He works around books for a living, so surely even he knows how that Nook saga will end and he doesn't want any part of it.
5. Robots have taken over
Intuitive Surgical (ISRG +1.82%) was holding up until the final five minutes of trading yesterday.
Shares of the surgical robotics specialist were sliced after Bloomberg reported on a safety probe being launched by regulators.
The FDA is sending out a survey to surgeons at key hospitals using Intuitive's system where adverse incident reports have been unusually high.
This is a big deal. Intuitive Surgical has been able to sell its expensive da Vinci robotic arm system on the basis of quicker recovery times for the patient, less fatigue for the surgeon, and more procedures for the hospital. If anything disrupts this win-win-win situation, it will be hard on Intuitive Surgical.
However, what's the deal with Bloomberg pushing out this story with just a couple of minutes left in the trading day? News happens when it happens, but this was a thoroughly researched piece that would've served the efficient market better by coming out at a time when investors wouldn't be forced into knee-jerk reactions.
