Why Coach, Pier 1 Imports, and China Mobile Games and Entertainment Group Tumbled Today
Thursday brought a relative day of calm to investors, with major market benchmarks consolidating their gains from yesterday following the Federal Open Market Committee's decision to stay on its current course on the monetary policy front. With various crosscurrents pushing the stock market in both directions today, most investors focused on stories affecting individual companies. Among those stocks hit the hardest today were Coach , Pier 1 Imports , and China Mobile Games and Entertainment Group .
Coach dropped 9% after the long-suffering luxury handbag and accessories retailer announced that it would see a double-digit percentage drop in its full-year fiscal 2014 revenue. In order to try to limit the future damage of falling sales, Coach said that it would look to close 70 of its weaker-performing stores. Yet, although Coach is trying to fight a retail-industry trend toward discounting, it has looked at implementing discounts of its own recently, in a move that many believe would simply dilute its luxury brand rather than adding any true potential for valuable profit growth. At this point, Coach has no obvious solutions to handle competition from rivals that have done a masterful job of stealing market share away from the once-leading handbag seller.
Pier 1 Imports fell 13% after the home-furnishings retailer released a disappointing quarterly report. Same-store sales gains of 6.3% showed encouraging traffic trends, but Pier 1 has faced the same discounting-heavy environment that Coach and other retailers are dealing with right now. As a result, Pier 1's gross margins fell substantially during the quarter, with declines of 2.4 percentage points forcing the company to reduce its earnings guidance for the full year by almost 2%. With concerns about the health of the housing market, and its potential impact on sales of home-related goods, Pier 1 needs to right its ship quickly to avoid what could become much bigger problems down the road.
China Mobile Games and Entertainment Group plunged 22% as investors reacted to unconfirmed reports that the mobile-gaming company removed a substantial portion of its management team, with nine executives, including its president, reportedly facing bribery allegations. Even before today's drop, China Mobile Games had lost half its value in the past several months, although the company had seen huge gains in revenue, and impressive growth in average revenue per user, as well. Given past controversies involving Chinese small-cap stocks, investors have no tolerance for any uncertainty about Chinese companies, as today's big share-price move for China Mobile Games makes quite clear.
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The article Why Coach, Pier 1 Imports, and China Mobile Games and Entertainment Group Tumbled Today originally appeared on Fool.com.Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach. 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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