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.
The addition to the fast food chain's fall dollar menu was announced this week, and it will be made available starting on Sunday. True to its name, it's a classic hamburger with a few fries sprinkled on top.
The reason that the burger makes the cut is because it's likely to crush margins at the chain. The idea behind adding sandwiches to the dollar menu is that the restaurant can still make higher margins on the sale of sides and drinks. How likely is someone to order a French Fry Burger and a side of fries? If they're ordering off of the dollar menu, they may already be counting their pocket change.
So, sure, the French Fry Burger sounds like it will turn heads, but don't be surprised if franchisees begin bellyaching about weak margins and lower spending per customer in a few weeks.
2. Best Buy may be a better sell
Founder Richard Schulze has gone from being an interested buyer of his Best Buy (NYSE:BBY) chain, to being an automated seller.
Schulze initiated a Rule 10b5-1 plan to systematically unload a chunk of his stake. A year ago, he was trying to round up private equity pals to acquire the chain... and now he's a seller?
Well, to be fair, he wanted to buy Best Buy in the mid-$20s at a time when it was trading in the high teens. Now that the stock has more than doubled, it certainly does make sense for him to be a seller instead of a buyer.
Despite some welcome operational improvements that CEO Hubert Joly has instituted since joining the company last summer, sales continue to be sluggish at Best Buy.
3. Soda jerk
Disney (NYSE:DIS) has been at the forefront of theme park and resort technology, but it may be going too far by inserting RFID chips in its beverage containers.
The family entertainment giant is testing out a system at one of its hotels where refillable mugs and even single-use cups come with RFID chips to limit the number of refills.
Does Disney have a problem with hotel guests returning with their refillable mugs to grab free Coke on subsequent vacations? Probably. Are folks buying the single-use cups and coming back day after day to load up on Sprite? Sure.
However, aren't these folks already paying a ton of money to stay at a Disney resort? If Disney's going to be cutting its patrons off -- as it does with the disposable cups that are only good for no more than four refills in two hours -- it may wind up ruffling some feathers as it loses those guests to off-site hotels.
4. Sun sets
LDK Solar (OTC:LDKYQ) isn't as bright as the sun that it leans on to provide energy. The solar energy products maker kicked off the week by posting another quarterly loss on a sharp decline in revenue. Things then got worse when it warned that it's missing a debt payment this week because it doesn't have the money.
Solar energy is an industry that's often subsidized, but LDK Solar may be out of second chances. It's hard to get excited about LDK's call for sequential top-line improvement for the new quarter when it's chances of ever returning to profitability continue to dim.
5. YouTube is no longer response-able
Since shortly after its inception, video responses have been a major part of Google's (NASDAQ:GOOGL) YouTube. The community has rallied around the ability to communicate with fellow users by posting videos in response to clips. Well, YouTube announced this week that video responses will be nixed come Sep. 12.
YouTube argues that they aren't effective with a click-through rate of a measly 0.0004%. However, the math is a bit deceptive. There are a lot of video responses, and a lot of viewers. The exact connection between one particular video watcher and a response video may be one in 250,000, but it all does add up in volume.
Did the art of video responses get spam-riddled after some time? Sure. That happens. However, killing off video responses entirely seems to be a bad idea. Google's hinting at possibly letting users add video links in text responses -- and if so, that will be better than nothing -- but it still doesn't feel right to kill off an important part of the YouTube experience.