These 2 actions show that the market rout goes far beyond technology
As Friday progressed, the stock market proved unable to take advantage of its rebound on Thursday. Investors seem to be nervous about a wide variety of things, and this has translated into substantial losses, especially in high growth stocks. Starting at 1:30 p.m. ET, the Dow Jones Industrial Average (^ DJI -0.79% ) was down 120 points to 34,519. S&P 500 (^ GSPC -1.52% ) lost 50 points to 4,527, and the Nasdaq composite (^ IXIC -2.59% ) was the hardest hit, dropping 340 points to 15,042.
It’s easy to conclude from the sharp drop in the Nasdaq that tech stocks were the biggest problem on Wall Street. Yet while some top tech stocks were indeed among the biggest losers, you might also find big declines among decidedly non-tech companies. Below we’ll take a closer look at why Smith & Wesson brands (SWBI -28.81% ) and Ollie’s Bargain Outlet Holdings (OLLI -20.66% ) found themselves at the top of the refusal list.
Smith & Wesson sinks
Smith & Wesson Brands shares fell nearly 30% on Friday afternoon. The arms maker has suffered from poor financial performance and investors expect it to be the same in the future.
Smith & Wesson’s tax results for the second quarter fell short of what shareholders expected to see from the company. Revenue of $ 230.5 million fell more than 7% year-on-year. Adjusted net income increased less than 5% from a year ago, although a sharp decline in the number of shares led to adjusted earnings of $ 1.13 per share, up more than 20 % compared to the second quarter of fiscal 2021.
CEO Mark Smith was proud of the result, highlighting the efficiency efforts that have helped the company cope with declining sales while improving margins. Smith said the drop in demand was natural given historic highs during the worst times of the pandemic, and the company continues to roll out new products to ensure long-term financial strength.
The results prompted Cowen analysts to downgrade Smith & Wesson shares from outperforming market performance and lowering target stock prices from $ 16 per share to $ 22. Indeed, if inventory issues prove to be difficult during the holiday season, it could prolong the difficulties Smith & Wesson faces.
Ollie’s sees its stock drop
Elsewhere, Ollie’s Bargain Outlet Holdings has seen its shares fall by more than 20%. The discount retailer had seen tremendous growth at the start of 2021, but its latest results have failed to keep its business momentum positive.
Ollie had to deal with disappointment in the third quarter. Revenue fell 7.5% to $ 383.5 million, with same-store sales falling even more than 15.5% from last year’s levels. Even compared to pre-pandemic results, Ollie’s rosters were down 1.3% from the third quarter of 2019. Ollie’s bottom line saw even bigger declines, adjusted net profit having fallen nearly 50% to $ 22 million. The resulting adjusted earnings of $ 0.34 per share failed to meet shareholder expectations for the company.
Ollie’s pointed out that headwinds in the supply chain were the main culprit for its below-average performance, and sadly, those challenges also persisted into the start of the fourth quarter. While the long-term outlook looks brighter with strategic initiatives to reduce costs and increase efficiency, Ollie’s may need some time before the full benefits of its efforts pay off.
When growth stocks lose momentum, it’s hard to get them back. For now, Ollie’s investors appear to be on hold in hopes that buyers will return to the stores and the company’s revenue and profits will move in the right direction again.
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