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Why Rite Aid, Groupon, and Sotheby's Slumped Today

Dan Caplinger, The Motley Fool

Wall Street had a positive session on Monday. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all worked their way upward near their all-time highs, with most of the benchmarks finishing within 1% or 2% of their high-water marks. Market participants have generally been pleased with the way that second-quarter earnings season has gone, and high-profile names have contributed to favorable sentiment. But bad news from some companies has still held back the broader market from potential gains. Rite Aid (NYSE: RAD), Groupon (NASDAQ: GRPN), and Sotheby's (NYSE: BID) were among the worst performers on the day. Here's why they did so poorly.

Rite Aid warns of potential problems

Shares of Rite Aid plunged 10% after the drugstore chain issued a warning about its outlook for the 2019 fiscal year. The company now expects to post an adjusted net loss for the year, down from previous guidance for a profit of $0.02 to $0.06 per share, and other measures of profitability were similarly moved lower from past projections. Rite Aid blamed the change in guidance on the generic drug market, where it believes it won't be able to be as efficient with its purchasing efforts as it has been in the past. Even though the drugstore chain tried to reassure investors that revenue, same-store sales, and key metrics like prescription counts and pharmacy reimbursement rates remain in line with previous expectations, Rite Aid shareholders worry that any further problems could have an impact on its proposed deal with privately held grocery store chain Albertson's, on which the company will vote later this week.

Four Rite Aid store-brand products next to ad copy.

Image source: Rite Aid.

Groupon gets discounted

Groupon stock finished 6% lower, giving back ground in the wake of the release of its second-quarter financial results early Friday. The company once known primarily for daily deal discounts saw revenue fall 7% from year-earlier levels, and adjusted net income was down more than 10%. Groupon has argued that it's willing to sacrifice sales in order to focus on the most profitable opportunities at its disposal, but investors still seem unconvinced that the company's attempt to broaden its scope to include a wider range of e-commerce opportunities is the best strategic direction available. Although the company's shares climbed on Friday due to speculation about a possible buyout, the lack of details emerging over the weekend seemed to dampen the spirits of more bullish investors.

Sotheby's drops the hammer

Finally, shares of Sotheby's fell almost 6%. The auction house reported disappointing results in its second-quarter financial report, including a 26% decline in net income. Sotheby's noted that calendar impacts played a key role in the results, because some of its high-profile spring showcases in Hong Kong occurred in the first quarter rather than the second quarter this year. Even so, six-month figures were also relatively weak, and those following the stock seem increasingly nervous that the favorable environment that the high-priced art and collectibles market has seen recently could come to an end before Sotheby's has a chance to diversify its exposure and differentiate itself fully from other auction houses.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.