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.
Stocks got back on a positive footing Tuesday, with positive trade-deficit data making investors more optimistic about U.S. economic growth. Major-market benchmarks finished the day up 0.5% to 1%, but for GameStop (NYSE:GME), hhgregg (OTC:HGGGQ), and RadioShack (OTC:RSHCQ), the news wasn't nearly as good.
GameStop declined 8% after Sony (NYSE:SNE) announced that it would offer a streaming video game service for users of its PlayStation 3, 4, and Vita consoles. The news is obviously bad for GameStop, which relies on used game sales as some of its highest-margin business. Nevertheless, digital-download concerns have been a threat for GameStop for a while, and at least while consumers remain excited about new PlayStation and Xbox consoles, GameStop's business isn't likely to take an immediate hit. In the long run, though, GameStop needs to figure out how it will adapt to a digital environment.
The 11% drop in hhgregg shares today added to yesterday's 5% losses, with the electronics retailer having issued a warning about its revenue from the holiday quarter. The company said yesterday that year-over-year sales would drop 11.6%, with an 11.2% plunge in comparable-store sales producing most of the revenue decline. CEO Dennis May pointed to weakness in its consumer electronics, computing, and wireless products during the quarter, and while he emphasized that hhgregg would remain profitable, he said that promotional offerings throughout the industry hurt its results. The big question for investors is whether the rival Best Buy (NYSE:BBY) will see the same pressures, or whether its own competitive activity proved more successful than hhgregg's did.
Elsewhere in the electronics industry, RadioShack fell 6% after The Wall Street Journal reported last night that the stock had seen substantial options activity among investors entering positions that would profit from a continued drop in the company's stock. RadioShack has attracted attention from short-term traders in the past, especially during times of financial turmoil for the company. Unless the holiday quarter offers some positive surprises for the company, RadioShack could continue to see bearish investors making bets on its possible demise.