When I was a kid, I bought my first–and only–Ham radio telegraph key at RadioShack (RSH), which was a haven for those of us geeky enough to like playing with electronics. I also adored its packaged electronic kits, with those little metal springs to hold the wires. But that’s not today’s RadioShack, not really.
Getty Images The problem is, that RadioShack doesn’t know what it is anymore, as clearly demonstrated by second-quarter loss of $1.11, well below forecasts for a 37 cents loss. The Wall Street Journal has the details:
Earlier this year [CEO Joe] Magnacca, a former Walgreen Co. executive who was hired in February, outlined a strategy to refurbish stores by overhauling layouts and removing items from the shelves, part of a broader effort to improve perception among younger customers while keeping traditional “do-it-yourself” patrons satisfied. The company plans to open or remodel more than 100 of its roughly 4,300 stores with some form of that new design by the end of the year.
In the meantime, RadioShack’s quarterly loss widened to $112.4 million from $47.1 million a year earlier as overall sales fell 10% to $805.4 million.
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Sales at stores open at least a year dropped 8.4% as the company cleared stockpiles of less-profitable products by marking down devices or, in most cases, unloading them on wholesalers. The effort squeezed the company’s gross margin down to 30.1% from 36% a year earlier.
RadioShack also announced that it had hired two executives with J.C. Penney (JCP) pasts to help improve merchandising and global sourcing. Yes, JC Penney. That will make investors feel good.
Still, JCPenney RadioShack was able to sign an $835 million financing deal at “very market-based competitive rates,” its CFO said.
BB&T Capital Markets’ Anthony Chukumba and Eric Cohen survey the damage:
RadioShack continued to stumble in Q3'13, and we saw scant evidence in the company's results a turnaround is on the horizon. While we are encouraged to see RadioShack secure the necessary financing to make it through the upcoming holiday selling season, we still have serious concerns about the company's long-term viability—particularly as Best Buy (BBY) continues to right its ship and Amazon (AMZN) becomes a larger player in consumer electronics retailing.
Radioshack’s shares have dropped 21% today, and Chukumba and Cohen continue to rate the stock a hold. Because at $$2.79, what else are you going to do?
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