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Rite Aid Slumps, Best Buy Bumps as New Model Takes Form

By John Divine – Mar 21, 2014 at 6:25PM

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Wal-Mart maintains momentum despite Dow's Friday drop

Stocks briefly reached weekly highs on Friday, only to retreat in afternoon trading to finish in the red. Selling in the health-care sector caused the otherwise-balanced market to lose ground, as regulatory scrutiny in the biotech space highlighted risks for investors. With no important new data to focus on, the Dow Jones Industrial Average (^DJI 1.26%) sold into the weekend, shedding 28 points, or 0.2%, to end at 16,302. 

Wal-Mart (WMT 1.22%) shareholders didn't see much reason to worry about the biotech space, bidding shares 1% higher Friday. The stock has enjoyed a modest bump since announcing its entry into the used video game business earlier this week. The area isn't big enough to be a game changer for Wal-Mart, but considering the hefty margins in the space, it's economical and likely a shrewd move. Wal-Mart already sells video games, so it won't need to build new wings for its locations, or devote much more of its precious square footage to enter the market.

Wal-Mart's move is, overall, a negative for electronics retailer Best Buy (BBY 3.92%), which, behind Game Stop, is the biggest player in video game trade-ins. With that in mind, Best Buy's 4.3% pop today might seem like a head-scratcher, but investors were correct to dismiss the new competition as immaterial. Best Buy is making major changes to its store plans, adapting to its new role as the premier electronics showroom. By inking deals with the likes of Samsung, Microsoft, and SolarCity, the company has bigger concerns than giving college students beer money for their Zelda games.

Finally, shares of Rite Aid Corporation (RAD 3.70%) lost 3.4% Friday. Investors in the drug store have been amply rewarded in the last year, as Rite Aid's finances have flourished. By shutting down unsuccessful locations, and growing same-store sales through pharmacy revenue gains, it's built itself a nice little bandwagon fan base on Wall Street. as shares rallied 245% in the last year. One recent threat to the Rite Aid gain train is pressure from state regulators for drug stores to cease all tobacco sales, which not only generate foot traffic, but provide ancillary sales from other in-store offerings.

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 SolarCity. The Motley Fool owns shares of GameStop, Microsoft, and SolarCity. 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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