Rite Aid Stock Roars, J.C. Penney Wilts Into Weekend

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Earnings season continued to drive the direction of the stock market today and, in response to weak results from corporate heavyweights like Intel and General Electric, that direction was mostly downward. While 21 of its 30 components fell, a handful of the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) heaviest-weighted members posted big gains today, and the index actually advanced 41 points, or 0.3%, to end at 16,458. While the other two benchmark U.S. indexes fell, the Dow managed to evade losses, and now heads into the long weekend having eked out 0.1% gains on the week. 

McDonald's  (NYSE: MCD  ) stock did nothing to contribute to the Dow's deceptive gains Friday, as shares shed 1.2%. Investors may understandably be a little anxious about next Thursday's earnings release, which is unlikely to send the stock soaring. McDonald's most recent major product launch, Mighty Wings, was pretty much an abject failure, and the fast-food giant ended up with about 10 million pounds of the unsold product on its hands last month. Hopefully, its plan to team with Kraft to hawk its popular McCafe coffee line in grocery stores this year won't have the same result, but perhaps cartoonishly large mounds of unsold coffee could be consumed by executives to inspire some better ideas.

Rite Aid (NYSE: RAD  ) stock, on the other hand, climbed 4.7% Friday. This is nothing new for investors wise or lucky enough to have bought Rite Aid shares just a year ago; shares have soared more than 270% since then. In 2013, improving margins on generic drugs, and steadily increasing same-store sales growth, drove the company to its first profit in six years. Flu season, and a surging insured population due to Obamacare, remain potential catalysts moving forward, but the stock isn't without risk, of course. Aside from Rite Aid's potentially stretched valuation, rival CVS Caremark is taking aggressive steps to differentiate itself by adding a nutritional focus to its stores.

Beleaguered department store J.C. Penney (NYSE: JCP  ) finds itself in a much less enviable position, and the stock continued to slide on Friday in the wake of Wednesday's revelation that the company will be shutting down stores and laying off workers. J.C. Penney will close 33 of its worst-performing domestic locations, cutting about 2,000 jobs in the process. Sometimes, Wall Street applauds cost-cutting moves like these -- the business estimates it will save $65 million annually as a result of the decision -- but given the retailer's recent struggles, this move has desperation written all over it. Shares tumbled 5.5% today.

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  • Report this Comment On January 18, 2014, at 2:52 PM, ffbj wrote:

    If you own JCP you probably want to run over to RAD, and get some aspirin.

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