Costco, Staples, and Pandora Tank on Earnings, but Dow Notches a Win

Snap on those Air Jordan's, smear on that eye black, and toss a bit more protein powder on your morning eggs -- Wall Street's getting pumped for the big February jobs report due Friday morning after the Dow rose 62 points Thursday in eager anticipation.

1. Costco blames groceries for surprise profit fall
It's too bad that Costco couldn't buy its earnings report at Costco. Shares of the discount mega-retailer Costco  dropped 2.8% Thursday after reporting an impressive 6% increase in sales, but a 15% drop in profits. That's not a cool combo for investors.

Please explain? Here's the deal -- when Costco offers insanely low prices on soap, they're expecting you to walk in, become excited (aroused?), and end up grabbing high-margin electronics for your friends before you leave. But during the last quarter, instead of computers, shoppers stuck with the low-margin cheap groceries (the Costco bag 'o kale deal is hardcore).

The takeaway is that Costco isn't alone. Fellow big-box retailers Walmart and Target also suffered slow fourth quarters (although their revenues fell from a year ago, while Costco's gained). Interestingly, by lowering its famous membership fees to get in on the savings fun, Costco's membership club did impressively grow by 4%.


2. Pandora Radio falls as competition gains
Listen to this: Shares of music-streaming pioneer Pandora  fell 5.6% Thursday after announcing in its earnings report that the company is dropping its all-important monthly statistics on listeners. Pandora's revenues beat Wall Street expectations, but its projections for the rest of 2014 didn't sound good.

The takeaway is that, like a battle of the bands, Pandora is facing some increasing competition -- iTunes radio was launched last fall, and privately owned Spotify just acquired a start-up that makes music recommendations. Pandora may have 70% of the U.S. Internet radio market share, but investors don't like what they're hearing.

3. Staples reveals broken fourth-quarter earnings
The place that used to be essential for your printer paper, binders, and... Staples is closing 225 stores by 2015. The office supply store Staples  announced fourth-quarter revenues of $5.9 billion, down 11% from the year before. Earnings of $388 million were also way down, and even further below what analysts expected.

Old retail is getting crushed this week following Radio Shack's market pounding Wednesday. Staples walked the plank Thursday, reported terrible earnings, announced store closures, and fell into a pool of Wall Street sharks. The stock dropped 15% to the lowest level in more than a year. 

The company blamed Apple? Sort of. Apparently, one cure for poor retail sales is to fill stores with sexy iPhones -- shoppers are bound to follow. Besides the usual suspects (a shorter holiday season and the frigid winter weather), the Staples CEO said the lack of Apple products hurt shopper traffic in the quarter. 

Friday:

  • The government's official February Nonfarm Payrolls Report
  • February Unemployment Rate is revealed

MarketSnacks Fact of the Day: Pabst Blue Ribbon ("PBR") overtook Coors and Sam Adams this decade on the list of America's most consumed beer and has also been dubbed "hipster's choice of beer".

As originally published on MarketSnacks.com

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The article Costco, Staples, and Pandora Tank on Earnings, but Dow Notches a Win originally appeared on Fool.com.

Jack Kramer and Nick Martell have no position in any stocks mentioned.  The Motley Fool recommends Costco Wholesale and Pandora Media. The Motley Fool owns shares of Costco Wholesale, Pandora Media, and Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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