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RadioShack Still Has Hope, But Needs A Strategy Change
Posted February 22, 2012
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By Vince Martin
The carnage continued at RadioShack (RSH) on Tuesday, as the company reported disappointing fourth quarter results and the stock fell nearly 8%. The stock had previously dropped some 30% on January 31st when the company pre-announced weaker sales and net income for the quarter, and eliminated its previously announced $200 million share buyback program.
In the wake of that announcement, many RadioShack bears jumped to the conclusion that RadioShack's business model was broken, with many comparing RadioShack to struggling Best Buy (BBY) or to now-defunct Circuit City. But, as I argued a few weeks ago, the problems at "the Shack" are largely self-inflicted. Its transition from a retailer of electronics accessories to a one-stop shop for mobile phones, tablets, and other devices has stumbled time and time again. Third quarter earnings were weakened by issues with the company's rollout of products from Verizon (VZ), dropping the stock 11% in the wake of that report. This quarter's weakness was "due in large part to the underperformance of the Sprint (S) postpaid wireless business and reflect further unanticipated changes in Sprint's customer and credit models," according to the fourth quarter pre-announcement. As such, in six months, the agreements with two of the company's three wireless partners (AT&T (T) being the third) have performed below expectations, and the stock has been halved from its late July highs. READ FULL ARTICLE HERE
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