5. Wet Seal Gets Soaked
Somebody get the folks at poor
a towel because the company is obviously all washed up.
In the latest wave of bad news to crash down on the teen retailer, Wet Seal fired CEO Susan McGalla Monday, causing its shares to sink 12% to $2.60. Wet Seal also said its second-quarter loss will be a penny or more higher than the nickel that Wall Street analysts had already penciled in when it reports results August 13.
Yep, it was certainly a tough way for Wet Seal to start the week. And it didn't get any better from there. After the clothing seller announced McGalla's ousting, the Clinton Group, which owns 4.3% of Wet Seal's stock, posted a letter to Wet Seal's board urging it to peddle the company.
"We simply cannot wait for the Board to hire yet another Chief Executive -- the next one will be the fourth in five years -- to embark on yet another change in strategy with the aim of turning around the Company. That path is simply too uncertain," wrote Clinton's Senior Portfolio Manager Joseph DePerio, adding that it's also about time Wet Seal returned some of that $148 million in cash its hoarding to shareholders.
Please note -- all you conclusion-jumpers out there -- that McGalla's dismissal was the result of 11 straight months of declining same-store sales at the company and not the discrimination suit leveled against it earlier this month. In case you missed it, a trio of former employees accused Wet Seal's "most senior executives" of failing to promote black store managers because they did not represent the company's image.
Once again, as CFO Steven Benrubi told the
, the firing was "strictly due to the financial performance of the company" and had absolutely, positively nothing to do with the racism allegations.
Fine Steven! We'll drop the suit entirely. Consider it forgotten. We'll just say that McGalla got canned because Wet Seal categorically, unconditionally sucks as a retailer. So much so that its stock has lost half its value over the past year and one of its largest shareholders is itching to sell it lest they lose the remaining half.
How does that work for you?
4. STEC's Brotherly Larceny
Come on you
Securities and Exchange Commission
book-throwers. Take mercy on
CEO Manouch Moshayedi. The man is clearly his brother's keeper, so what's the harm that he kept a little for himself too?
Okay. He kept a lot for himself and it looks like he did it illegally. But still.
The SEC filed a civil complaint against the solid state drive maker's chief executive late last week, accusing Moshayedi of violating insider trading rules in a secondary offering of his shares. According to the charges, Moshayedi unloaded a major chunk of his holdings, as well as shares owned by his co-founder brother, in August 2009 despite learning "critical nonpublic information" about a deal with
gone sour that would likely have slammed the stock.
"Moshayedi did not call off the offering and abstain from selling his shares once he possessed the negative information unbeknownst to the investing public. Instead, he engaged in a fraudulent scheme to hide the truth through a secret side deal, and proceeded with the sale of 9 million shares from which he and his brother reaped gross proceeds of approximately $134 million each," says the SEC about Moshayedi, who according to his lawyer intends to vigorously defend himself.
Wow! $134 million each. Oh brother! Literally.
The part of the SEC allegation that really made us chuckle was when Moshayedi begged EMC brass to step up its third-quarter order to $50 million from $35 million ahead of a call with Wall Street analysts.
"Just tell me what you need, I knew asking you guys for a favor would go nowhere so I am now back at paying for favors. What is your price for keeping inventory for a week or two? I thought East Coast guys from Boston area were supposed to be nice," pitifully pleaded Moshayedi in an email.
Unluckily, just hours before that call, those "nice" guys from Boston treated Moshayedi like a Yankee fan in Fenway Park, telling him that they were no longer buying STEC products in volume. Nevertheless, Moshayedi did not inform Wall Street or his investors of that unfortunate fact until three months later in November. Once STEC's CEO did come clean about EMC's demand reduction, the stock price sank by nearly 40%, but of course by that time the Moshayedi brothers had already made their sales at far higher prices.
Hey, you know what they say. Bros before holders. Shareholders that is.
3. Best Buy Bonus Bunkum
Remember the old Woody Allen quote that "80% of success is showing up?" Well, add another 20% and you've got the new executive bonus plan for our good friends over at
We're serious. If you want to cash in at Best Buy then simply show up! All you need is a pulse, no performance required.
We here at the Dumbest Lab first became aware of the struggling electronics retailer's generous pay scheme after reading a
report saying Best Buy's highly regarded compensation consultant quit after the company gave millions of dollars in retention bonuses to more than 100 managers without attaching performance targets to those awards.
Don Delves, president of the Chicago-based Delves Group, apparently walked off in protest over the decision after spending seven years as an independent consultant to Best Buy's compensation committee.
Let's take a step back here. We need to wrap our heads around this thing.
Best Buy's former CEO Brian Dunn leaves in April after a sex scandal. The company's stock is down almost 40% this year because
are eating its lunch. And Best Buy's recently resigned Chairman Richard Schulze is weighing the idea of taking the company private. But regardless of all that disarray, these guys feel the need to pony up to retain their so-called talent.
That's just batty. Speaking of which, somebody get former Oriole "Iron Man" Cal Ripken on the line. Tell him we've got the perfect job for him and he won't have to lift a finger, let alone worry about his batting average.
"We're confident that the compensation paid by Best Buy is fair, reflects market realities and is based on responsible practices that reflect the transformation of the organization," said Best Buy spokesman Bruce Hight in a statement.
Excuse us Bruce, but what "market realities" are you referring to? Where are these folks going to go? Circuit City? Nobody Beats the Wiz? The competition doesn't even exist anymore, so it's not like you are going to get into a bidding war over their services.
Heck, even Crazy Eddie wasn't insane enough to pay people just to hang around...Okay, maybe he was, but look where that got him.
2. DeVry's Daffy Downgrades
Look, we understand it's not easy for Wall Street analysts to get it right all the time. And we'll also be the first to admit that predicting the future is a tough, often thankless task, especially with critics like us braying at their bad calls while neglecting the good ones.
All that said, those morons really blew it big time with
Shares of the for-profit educator shattered Tuesday, falling 25% to barely above $20, after the company sliced its fiscal fourth-quarter earnings outlook as a result of lower enrollment. DeVry said it now expects to earn 43 to 46 cents per share on revenue of between $500 million and $510 million for the period when it reports results August 9.
So what were Wall Street's prognosticators estimating prior to DeVry's pre-announcement? Well, how about 79 cents per share in earnings on revenue of $519.2 million.
Oh yeah, they whiffed big time, which surprised us considering all the recent calamities in the industry. Seriously, after
selloff over accreditation worries earlier this month,
shellacking in March due to enrollment declines and
collapse last year as a result of improper placement lawsuits, one would think that the analyst community would have sharpened their pencils when it came to their DeVry outlook.
Nonetheless, based on their sky-high original targets for the company, that clearly was not the case. Despite all the carnage in the for-profit education sector, they obviously didn't learn their lesson.
RW Baird has subsequently cut its price target to $23 from $35. Bank of America Merrill Lynch downgraded DeVry to neutral and lowered its price objective to $23 from $37. Citigroup went to $25 from $40. JPMorgan, $23 from $35. Topeka Capital, $23 from $40.
Look, we know that DeVry is an industry leader and has so far avoided stepping on the most serious mines that have been blowing up its competitors. But that does not excuse these Wall Street analysts from stupidly luring investors onto the minefield with sky-high price targets in the first place.
1. Weill Goes Wild
Chairman Sanford "Sandy" Weill was talking on television Wednesday and he casually said that it's time for the United States to "go and split up investment banking from banking."
To which we respond: WTF Weill? Are you out of your mind?
Weill, for those too young to remember, led the 1998 merger of
to form Citigroup, the so-called "financial supermarket" that was rescued from bankruptcy during the 2008 financial crisis with a $45 billion investment by the federal government.
And for those that may have forgotten, Weill was also a major force in overturning the Glass-Steagall Act that originally separated investment and commercial banks. Weill fiercely lobbied then-President Bill Clinton throughout the 1990s to dump the Depression-era law. Clinton finally caved in 1999 and signed the Gramm-Leach-Bliley Act, which ushered in the era of too big to fail banks.
Put simply, Weill is the Dr. Frankenstein of the financial industry and the monsters he helped create -- making him filthy rich in the process -- ultimately turned on their masters and nearly destroyed the global economy. That's what makes his two-faced comments so darn sickening and even harder to take at face value.
Sincerely Sandy, if you are going to be this hypocritical then save it for a deathbed recantation, don't be an ass and do it on
"I am suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won't be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading ... not subject to a Volcker rule," continued Weill, now a philanthropist after retiring as Citigroup's Chairman in 2006.
Wait! Don't barf yet. Hold it just one more second until you've read Weill's reason for changing his opinion on the benefits of behemoth banks.
"The world that we live in now is different from the world we lived in 10 years ago," said Weill.
Like they say in politics, he was for it before he was against it. And if he had half a brain he would have kept his mouth shut about it.
But he didn't.
Feel free to puke now.
Written by Gregg Greenberg in New York
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.