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. Game over
There seems to be no signs of bottoming out for the video game industry. After three years of steady declines, February proved to be another bad month for the companies catering to diehard gamers.
NPD Group reported on Thursday night that video game software sales plunged 27% in February. Keep in mind that this it on top of — or below — a 20% plunge last February.
Cynics will argue that NPD Group’s gauge measures only traditional retail sales. However, digital sales haven’t been enough to offset the gaming industry’s incessant slide.
Why does this item top the list of dumb stock moves? Well, the country’s two largest video game companies just hit fresh 52-week highs. Top dog Activision Blizzard, Inc. (NASDAQ:ATVI) hit a four-year high yesterday, even though analysts see revenue and earnings declining by 15% and 28%, respectively, this year.
That just doesn’t seem right.
2. Penney for your thoughts
J.C. Penney Company, Inc. (NYSE:JCP) rallied earlier in the week on a rumor that CEO Ron Johnson would be getting fired.
Well, that didn’t happen — and a company spokesman even cleared up that Johnson has no intention of resigning in the near future.
Some seem to believe that Johnson will be able to keep his job if he’s able to stop the brutal slide in sales. J.C. Penney’s sales plunged 25% last year. However, that seems like a terrible approach. J.C. Penney Company, Inc. (NYSE:JCP) saw its net sales fall nearly $4.3 billion this past year. Sales don’t need to hold firm here. J.C. Penney Company, Inc. (NYSE:JCP) needs to make back that $4.3 billion top-line shortfall, and even then it will merely be back to where it was a year ago when sales were so bad that Johnson was brought in to begin wtih.
The news just doesn’t get any easier for the unfortunate mall chain.
Later in the week, reports indicated that lender CIT Group will begin charging J.C. Penney Company, Inc. (NYSE:JCP)’s vendors a 1% surcharge on invoices to offset the chain’s growing credit risk. You just know that this isn’t going to go down well with the chain’s suppliers. They’re already taking a risk selling to a fading retailer and now they have to pay a premium for that right?