Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After the major indexes closed the day on a mixed note, with the Dow Jones Industrial Average finishing down 0.11%, the S&P 500 closing up by 0.03%, and the Nasdaq losing 0.23%, a few companies made big news in the after-hours session after releasing sensitive company-specific data.
The first was Alcoa (AA), which unofficially kicked off earnings season today after the closing bell. The aluminum producer ended the regular trading session down 1.29% after news that the company would pay $384 million to resolve charges of bribery in Bahrain. After reporting lower-than-expected earnings per share, however, the stock dropped another 4.4% in the extended trading hours to finish the day at $10.22. Analysts were expecting $5.34 billion in revenue, and $0.06 per share in earnings; Alcoa reported $5.59 billion in revenue, but only $0.04 in earnings. Furthermore, revenue was lower by 5% when compared to the same time frame last year, and the company had to write down the value of acquisitions it made over a decade ago due to weak aluminum prices worldwide. Many investors are wondering what the long-term picture for the company looks like.
Another big after-hours loser was Sears Holding (SHLDQ), which fell 3.18% during the regular trading session and then another 13.11% in the extended session. The decline after market close came after the company reported that same-store sales at both its K-Mart and Sears locations were down during the holiday shopping season. At Sears, sales declined 9.2%, and K-Mart experienced a slump of 5.7%. The retailer has been struggling for some time now, and this may be one of the final shots the company can take before completely falling apart. Investors need to review their positions, and recognize that a company that seems like a deep hidden value may actually be just a value trap.
Two of the big winners after the closing bell were Abercrombie & Fitch (ANF 4.73%) and The Gap (GPS 4.08%). The companies gained 13.94% and 2.28%, respectively.
Surprisingly, while Abercrombie & Fitch also experienced a slower holiday shopping season this year than last, with sales declining 6%, investors sent the company's shares higher. This was because Wall Street had been expecting a much worse holiday season than what the company actually achieved. The retailer has been struggling, but said on Thursday that its sales and cost-cutting during the holiday period paid off. Furthermore, management believes that the company's adjusted earnings for the fiscal year, which ends this month, will fall within the range of $1.55 to $1.65 per share, much higher than the previous outlook of $1.40 to $1.50 per share that it had previously announced.
The Gap, on the other hand, had a stronger holiday shopping season in 2013 than 2012, as sales rose 1%. While that may not seem like a massive jump -- because it isn't -- the results aren't that bad when compared it to other retailers. But what really got the shares moving higher this evening was that management at The Gap also increased its forecasted earnings per share to fall within the upper end of its $2.57 to $2.65 per-share range. The increased sales, and more confident management team, have given investors more confidence, but anyone buying today needs to remember that the retail industry in very fickle and volatile, especially during the earnings season following the holidays.
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