Some companies become so badly damaged because of changes in the competitive markets or due to poor management decisions that their employees lose hope. This may be due to the fact that they believe the corporations that they work for have little future, or that they will be laid off as their employers try to save these corporations.
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This loss of hope is exacerbated by the state of the economy. A person who is fired now likely will find it extremely hard to find new work. Nearly 6 million Americans have been out of a job for more than half a year, which means that work is scarce either because companies have never recovered from the recession or because firms are concerned that a new recession has started to choke the economy.
It is impossible to know whether the employees at a very badly run company have completely lost hope in their situations. However, this is highly likely in certain corporations. Layoffs have already started at many of these companies, sales have fallen, or Wall St. has passed a verdict they have faltered badly or failed.
24/7 Wall St. has compiled a list of companies that are in deep trouble. This is based on share prices, layoffs, analysts' reports about their futures of these firms and the extent to which they have missed Wall St. predictions about earnings-per-share or are likely to in future.
1. Best Buy (NYSE: BBY - News) recently released earnings, and they were much worse than Wall St. expected. Net income fell to $177 million, or EPS of $0.47, for the quarter ended Aug. 27, down from $254 million, or EPS of $0.60, last year. Analysts expected EPS of $0.52, according to a survey by FactSet. Best Buy dropped its forecast for the year. It took this action because of concerns about TV and phone sales, along with worry about the economy. Best Buy has had a string of earnings failures, due primarily to its failure to do well online. Best Buy recently said its website would carry items from third-party stores to expand its attraction to shoppers. This did nothing to improve the perception that investors have of the company. Fitch downgraded Best Buy in June. The company's shares are off 30% in the last year. Shares of rival Amazon (NASDAQ: AMZN - News) are higher by 60% for the same period.
2. Research In Motion (NASDAQ: RIMM - News) posted earnings recently that show its sharp decline has accelerated. Several analysts now believe the RIM BlackBerry smartphones will be no more than a "niche" product in a market it controlled almost completely four years ago. The bad earnings news took shares down from $29.54 to $23.93 in one day. RIM's stock is off almost 50% in the past year, while shares in rival Apple (NASDAQ: AAPL - News) are higher by more than 40%. RIM shipped only 200,000 units of its PlayBook tablet PC last quarter. Expectations had been for a number more than three times that. RIM revenue fell by 10% in the most recent period to $4.2 billion — a horrible situation for a company that was one of the most well-known growth stories for five years. EPS fell to $0.63 from $1.46. The consensus among the media and Wall St. is that RIM has almost no chance to recover. The company has already started to cut costs. It said in July it would lay off 10.5% of its workforce.
3. Talbots (NYSE: TLB - News) shares traded above $17 in May a year ago. They now trade at $3 after dipping to $2.25 recently. After the company released earnings two weeks ago, research firm Sterne Agee downgraded the stock to "neutral" from "buy." And the retailer posted results that were worse than expected. The corporation's quarterly loss from continuing operations was $37.4 million, or $0.54 per share, compared to last year's income from continuing operations of half a million, or $0.01 per share. The failing retailer said it expects to close about 110 stores in total, including 15 to 20 consolidations, through fiscal 2013. The corporation's chief creative officer, Michael Smaldone, was fired as earnings were announced. Oddly, Talbots did not have a replacement when it took this action.
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- Best Buy