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The stock market today is quiet on low volume but there are plenty of profits to be found since investors are still hopeful that central banks in Europe and the U.S. are ready to act.
Meanwhile, here are two well-known retail stocks that are headed in opposite directions today.
One is dropping, while the other–Urban Outfitters (URBN)–is up nearly 20% on the day.
Not surprisingly, the retailer headed to the downside is Best Buy Co Inc. (NYSE: BBY).
The retail electronics giant reported that its second-quarter profit plummeted more than 90% from the year earlier quarter showing the difficulties newly appointed Chief Executive Officer Hubert Joly faces in turning around the company.
The world's largest consumer electronics chain announced net income of $12 million, or 4 cents a share compared to $128 million, or 34 cents, a year earlier. Excluding previously announced restructuring charges, earnings were 20 cents a share. Analysts on average were expecting 31 cents.
Sales fell 3% to $10.55 billion, while analysts had forecast $10.63 billion. Sales at stores open at least 14 months fell 3.2% in the second quarter ended on August 4, including a 1.6% decline in the U.S. and an 8.2% drop internationally. Gross margins also fell more than 1% as Best Buy used more discounts to lure in customers.
"This is really a bad signal about the business, implying much more promotion than in the past," Michael Pachter, an analyst at Wedbush Securities in Los Angeles, emailed Bloomberg. He rates Best Buy neutral. "The factors leading to the decline don't look like they're going to decline any time soon."
Hubert Joly was appointed CEO just yesterday and will try to transition the company towards smaller stores while continuing to deal with founder and former chairman Richard Schulze's attempt to take the company private.
"The new strategic plan that they're trying to execute does not seem to be gaining material traction," John Tomlinson, an analyst at ITG Investment Research in New York, told Bloomberg. "The struggle between the former chairman and current management isn't something that is going to go away any time soon."
Best Buy also suspended its forecast for the second half of the year citing lowered global expectations and the newly appointed CEO as reasons for the uncertainty.
After the weak earnings report Schulze, who previously offered to take the retailer private for $24 to $26 a share, has more power to negotiate with the board of directors.
"Joly needs to quickly formulate a bold turnaround plan and sell it to stockholders," Erik Gordon, a University of Michigan business professor, said today in an e-mail. "If they don't buy his plan, they will sell their shares to Schulze, with or without board approval."
BBY stock is down more than 3% today after bottoming out at $16.25 its lowest intraday price since 2003.
On the other side of the divide, Urban Outfitters Inc. (Nasdaq: URBN) hit a 52-week high after reporting better than expected second-quarter earnings after Monday's closing bell.
The Philadelphia-based retailer, which also operates the Anthropologie and Free People brands in addition to its namesake store announced net income rose 8.1% to $61.3 million, or 42 cents a share, from $56.7 million, or 35 cents, a year earlier. Analysts were projecting earnings of 33 cents a share.
Revenue for the second quarter increased 11% to $676.3 million, ahead of analysts' estimates of $672.6. From a year earlier sales rose 14% at the Urban Outfitters chain, 3% at Anthropologie and 26% at Free People, the smallest of three brands.
"We're very encouraged by results, which speak to positive customer reaction to new assortments and ability to quickly adapt/chase new trends," Pamela Quintiliano, a New York-based analyst at Oppenheimer & Co., told Bloomberg today, reiterating her outperform rating on the company. "Results illustrate that the new management team is on track, with fundamentals continuing to improve dramatically."
URBN stock is up 32% this year and is soaring today, up over 18% as of noon.
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