5. SodaStream Gets Doused
Frankly SodaStream (SODA), nobody gives a damn about Scarlett.
Shares of the seltzer-machine maker, which trumpeted the hiring of sexpot Scarlett Johansson as its new spokesperson Saturday, got flattened Monday, falling over 26%, after it slashed its fiscal 2013 forecast due to disappointing Christmas sales. The Israel-based company says it now expects full-year net income of about $41.5 million on revenue of about $562 million, down from its prior projections of $54 million in profit on sales of approximately $567 million.
Come on folks. Nearly half of SodaStream's float was sold short at last check so it shouldn't be that big of a surprise that its bubble finally burst.
"Despite achieving all-time record sales, we failed to deliver our profit targets and are disappointed in our fourth quarter performance," said SodaStream CEO Daniel Birnbaum. "These preliminary results reflect a challenging holiday selling season in the U.S. and several factors, mostly from the second half of the quarter that negatively impacted our gross margin."
In other words, to quote TheStreet's very own Herb Greenberg, SodaStream is now an "all-in product, where nearly everybody who is going to get or give a SODA machine has done so or will." As a result, the company is cutting deals with retailers with the hope that higher volume will make up for lower margins and help it reduce a brimming inventory.
(Heck, we get all Herb's hate mail anyway so we might as well borrow a phrase or two from our buddy in San Diego.)
One thing Herb forgot to mention, however, was SodaStream's shameless ploy to redirect the Street's gaze onto the bombshell Johansson just prior to its earnings blowup.
"Scarlett is a long-time user and genuine fan of our products, a role model for healthy body image and a champion for environmental responsibility, making her the perfect choice for our global ambassador," flattered Birnbaum. "She truly embodies our brand values and we are honored to have her join our team."
"Healthy body". "Embodies our brand values." We get it. Scarlett's stacked.
Not that it matters anyway, Dan.
As much as those wolves on Wall Street appreciate Scarlett's bottom line, it's not going to keep them from focusing on yours.
4. Musk Fires Up
I have only one burning desire/Let me stand next to your...overheated adapter.
What's the matter, Jimi Hendrix fans? No good? Then move over Rover and let Elon take over.
Shares of Tesla (TSLA) were on -- OK, we'll say it -- fire Tuesday after the electric carmaker announced deliveries of its Model S sedan reached 6,900 in the fourth quarter, topping its own forecast by 20%. Jerome Guillen, Tesla's vice president of global sales and service, also told attendees at the Detroit auto show that the company expects to double its global sales and service locations -- now totaling around 150 altogether -- by year end.
And CEO Elon Musk plans to do it all alone, according to Diarmuid O'Connell, Tesla's vice president of business development.
"Elon is committed to independence," said O'Connell. "We already have the capacity internally to engineer the vehicle. There are no plans for partnership on that project."
Of course, Tesla stock effectively trades on bold statements like these. The company's shareholders lap up such rallying cries along with the stock, further squeezing the short-sellers who now account for almost half the company's float. Perhaps that's the only way they can justify the fact that Tesla has a $21 billion market cap compared to GM's (GM) $53 billion despite the fact that GM sold nearly 10 million vehicles globally last year compared to around 20,000 for Tesla.
Our favorite pronouncement of the week, however, came straight from Musk's mouth -- or at least his Twitter account -- when he called out the National Highway Traffic Safety Administration (NHTSA) for classifying the software fix to his charging stations as a "recall."
"Some confusion in media reports today. No Tesla vehicles are being physically recalled by Tesla," Musk said on Twitter. "The word 'recall' needs to be recalled."
You go Elon! We all know the government is probing last quarter's three Model S fires because they hate you and your semantics!
For that matter, that's probably what Boeing (BA) shareholders are saying about Uncle Sam's latest inquiry into its similarly smoke-plagued 787 Dreamliner. In a striking coincidence, Japan Airlines temporarily grounded one of its Dreamliners at Narita Airport for spewing white smoke Tuesday just as Musk was rebuking regulators over their so-called recall. Nobody was hurt as the incident occurred during scheduled maintenance activities with no passengers on board.
"The improvements made to the 787 battery system last year appear to have worked as designed," said Boeing in a statement. The company added that the issue "appears to have involved the venting of a single battery cell."
That's it! How about this upgrade to a Doors classic for all those Boeing bulls out there:
Come on baby vent my single battery cell/Try to set the night on venting.
What? No good again?
3. Lulu Takes a Licking
Forget the 12 days of Christmas, it was the 12 days of January that caused Lululemon (LULU) shares to crater.
Well, maybe not the full first 12 days of January. It's more like 11 and a half days if you count store closings and shortened hours for the New Year's holiday, but still.
Here's what happened. Lulu's stock took a licking Monday, Jan. 13, dropping 17% after its Chief Financial Officer John Currie lowered the yoga-wear retailer's fiscal fourth-quarter guidance range. Currie told the Street he's now looking for per share earnings of 71 to73 cents on revenue of $513 million to $518 million for the period ending Feb. 2. That's substantially lower than the company's prior guidance of 78 to 80 cents per share on revenue of $535 million to $540 million.
Honestly, it would have been fine with us if he came clean like everybody else and said holiday sales flat-out sucked. But no, as always, Lulu has to be different.
"We were on track to deliver on our sales and earnings guidance through the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully," claimed Currie. "Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter."
We know we're nitpickers, nevertheless, let us get this straight.
Nearly every single merchant in the mall from American Eagle to Zumiez has lowered guidance in the past two weeks due to crummy Christmas sales. Things were so bad over the holidays at J.C. Penney (JCP) that the retailer decided to simply skip its December same store sales results. That's right, not report them at all!
And did you see what happened to Best Buy's (BBY) shares Thursday when it posted domestic holiday comps down 0.9%? They went Kaboom!
Currie, however, wants us to believe that December was decidedly dandy for Lulu -- and Lulu alone. If we are to believe him, Lulu is cutting sales projections by as much as $27 million due to a slowdown during a short, promotional window in January as opposed to the all-important Christmas period.
Sorry, but like Lulu's merchandise, we're not buying it, and, as evidenced by the stock's shellacking, nobody else is either.
Look. We know Lulu's new CEO Laurent Potdevin really wants to chart a new course after last year's string of gaffes. Still, it would have been fine for Lulu to join the pack in this case instead of making bold pronouncements that skeptical folks like us would pore over.
After last year's sheer pants debacle, Lulu should know the importance of taking cover when you can get it.
2. Gravity Grips Intercept
Heads up Intercept Pharmaceuticals (ICPT) investors! The shares -- now around $280 -- are coming down as quickly as they went up.
Be honest Dumbest fans. Did you really think the Intercept story ended last week when the stock skyrocketed from $70 to $500?
Of course not! We all know "gravity" is not merely a movie where Sandra Bullock does space. It's also the Newtonian law -- and market maxim -- that says what goes up like gangbusters must come down and clock some unwitting fool in the cranium.
Shares of the New York-based biotech outfit blasted off last Thursday on news that a trial of its liver disease drug went so swimmingly that the test was halted. The market capitalization of the money-losing company eclipsed $9 billion at one point last Friday, helped along by Wall Street's analyst community which was tripping over itself to upgrade the heretofore untested stock. Most notably, Bank of America Merrill Lynch analyst Rachel McMinn boosted her price target from $81 to $872, predicting peak sales of $4 billion for the still untested drug.
Not to minimize McMinn's enthusiasm, but maybe she got a bit too excited. Had she waited a few hours before hitting send, she would have been able to factor into her forecast a National Institute of Health warning that users of Intercept's drug experienced higher than usual cholesterol levels.
The NIH news threw cold water on the overheated stock this week. Also dragging down Intercept's equity was a Bloomberg article in which the company's Chief Executive Officer Mark Pruzanski admitted he will likely need the help of a larger drugmaker to bring the company's experimental liver-disease treatment to market.
Oh, and all those supercharged short-sellers didn't help either. Those guys stamped on Intercept stock like they were putting out a fire with their feet once the tide turned against the company.
You know how those Bears love giving gravity a hand.
1. COO's to Go
A quick quiz for you Dumbest fans:
What is the value of a Chief Operating Officer?
A.) Up to $62 million
B.) 4 Executive Vice Presidents
C.) All of the above
D.) None of the above
(The answer will be revealed at the finish of this column.)
Yahoo! (YHOO) CEO Marissa Mayer kicked Chief Operating Officer Henrique de Castro to the curb Wednesday after money-whipping him away from Google (GOOG) in October 2012. De Castro was one of Marissa Mayer's first major hires since she came over from Google in July of that year, but there have been reports in recent months that the relationship between the two had soured, with de Castro being unable to turn around Yahoo!'s core advertising business.
Wall Street analysts estimate that the company's revenue fell 1% last year, and have penciled in a rise of 3% for 2014. Yahoo's share of digital advertising revenue in the U.S. declined to 5.8% in 2013 from 6.8%, according to research firm E-Marketer. Facebook (FB), on the other hand, grew to 7.4%. E-Marketer forecasts Yahoo's share to fall to 5% by 2015.
Despite his ouster, De Castro's fortunes are looking up. His pay package at Yahoo! was worth as much as $62 million over four years, including as much as $20 million in restricted stock units to compensate him for leaving Google. We're not exactly sure if he'll walk away with the whole shebang, but Henrique surely is not walking away empty-handed for his less-than-stellar 15 months at the company.
However many millions he ultimately ends up pocketing, de Castro will surely be doing better than the four new executive vice presidents at PetSmart (PETM) who are collectively replacing retiring COO Joseph O'Leary. PetSmart announced Wednesday it was redistributing O'Leary's duties and killing the position as opposed to promoting a single person to fill the COO spot.
The move was a puzzler on Wall Street though. PetSmart was smacked by a pair of downgrades including one from Michael Lasser of UBS who lowered PetSmart to "neutral" from "buy" and cut his price target to $72 from $82. Lasser doubted the retailer's ability to expand its market share due to its already large footprint and said the COO realignment "invites an added layer of unexplainable circumstances."
Shares of the company fell over 2% on Lasser's uncertainty.
With far more conviction we can say the answer to our little COO quiz -- at least this week -- is C.
--Written by Gregg Greenberg in New York