Jobs Data Sends Dow Higher; Radio Shack Keeps Plunging

Downsizing is the theme of the day, as Disney cuts jobs, and Office Depot stumbles,

Mar 6, 2014 at 6:18PM
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Stocks finished mostly higher on Thursday, as weekly jobless claims figures came in lower than expected. The four-week jobless claims average, which serves as a better indicator of the employment landscape, also fell; since November 2012, it's declined from more than 400,000 to the current 336,500 level. The improvement is good news for tomorrow's monthly jobs report from the Labor Department. Hoping today's numbers were indicative of an improving jobs market, the Dow Jones Industrial Average (DJINDICES:^DJI) added 61 points, or 0.4%, to end at 16,421. 

Ironically, Walt Disney (NYSE:DIS) shares rose today, perhaps, in part, because it's laying off workers. The stock tacked on 0.8% after news that Disney Interactive, the entertainment giant's gaming and Internet segment, will be trimming its workforce by about 26%, or 700 workers. While Disney will continue to develop some of its own mobile and online games, the company will rely increasingly on licensing. Disney Interactive has been a glaring blemish on the company's otherwise wildly profitable operations in recent years, only turning profitable in the last two quarters. Today's job cuts, and emphasis on tried and true licensed games, should help to keep it that way. 

Radio Shack (NYSE:RSHCQ) knows a thing or two about slimming down operations, as well, though the downsizing has been more out of necessity than choice. The decision to dramatically reduce its store count -- Radio Shack will close up to 26% of its locations, or 1,100 stores -- sent the stock spiraling on Tuesday, and shareholders are still feeling the fallout from the move; the stock tumbled 5.6% today. Unfortunately, I don't see Radio Shack's woes going away any time soon. While there will always be someone desperately in need of that tiny lightbulb for their reading lamp, I'm not sure that demand quite justifies the need for 4,000 retail locations.

Office Depot's (NASDAQ:ODP) future may turn out to be eerily similar to Radio Shack's if the current trends in office supply retailers hold up. Shares shed 5.7% today, as rival Staples announced the closure of 12% of its North American stores, sending the stock down 15%. Office Depot, fresh off a holiday quarter in which the company merged with rival Office Max and lost $144 million, is hoping to bolster its business by consolidating, while Staples, which has an enormous online presence, is sticking with what works, and shifting from brick-and-mortar operations to a more web-centric model.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Staples and Walt Disney. 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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