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A first-quarter earnings miss became the latest in a steady drumbeat of bad news coming from




The Fort Worth, Texas-based electronics retailer earned $8 million, or 6 cents a share, in the first quarter, down sharply from the year-ago $55 million, or 34 cents a share. The latest quarter included a pretax inventory writedown of $10 million. Minus one-time charges, the company earned about 10 cents a share, below the 17 cents that analysts surveyed by Thomson First Call projected.

Revenue rose 3% from a year ago to $1.16 billion, in line with Wall Street's $1.13 billion target. Same-store sales, or sales in stores open at least a year, dropped 1%, and the gross margin fell to 48.3% from 50.4% a year earlier as sales at lower-margin kiosks increased. Overhead costs rose 10% as store labor hours rose.

Shares of RadioShack were down 32 cents, or 1.8%, to $17.72 Friday. The shares hit a 52-week low of $17.18 in intraday trading, compared with a 52-week high of $27.24 on Aug. 11.

The collapse of the electronics chain's stock price has some investors wondering whether it has hit rock-bottom and it's time to stick a toe in the water. That sentiment, along with a cloud of speculation about buyout offers, has held the chain's valuation aloft. But Rick Weinhart, an analyst with Harris Nesbitt, says things may get worse from here.

"Given the number of private equity offers and activist activity that's taking place in retail these days, my clients are wondering at what point this stock becomes a target for such activity," says Weinhart. "My answer is not yet. The valuation doesn't support it, and the company is already doing a lot of the things that private equity would be doing at the company. So any buyer would face the same headwinds."

RadioShack is in the early stages of a long-term turnaround, but so far, little has gone right. Its problems worsened with a scandal at the top. In February, Chief Executive David Edmondson resigned in a very public flap after he admitted to inflating his educational background on his resume.

The company named Chief Operating Officer Claire Babrowski president and acting CEO, and began a search for a permanent chief executive. Babrowski, a former


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executive, is a candidate for the job, and Wall Street is wondering if RadioShack will settle on her or bring in someone new. In addition, Leonard Roberts, the company's executive chairman, has said he won't stand for re-election to the board and will retire at the completion of his term in May.

Meanwhile, RadioShack faces a host of challenges on an operational basis. It switched from selling phones and service for Verizon Wireless to Cingular Wireless, a venture between


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( BLS), in January, and the retailer still hasn't figured out how to sell the new product effectively.

"Wireless sales, in particular, were below our expectations and helped contribute to overall financials that were disappointing," the company said in its earnings release Friday.

In addition, RadioShack has tried several different cosmetic strategies in its stores that have yet to be effective.

"Continued investment in the stores at a high level is going to be necessary," says Weinhart. "If everything goes well in terms of the turnaround, they do have a brand that is worth supporting, but they are facing some tremendous headwinds right now."

The competitive landscape in the consumer electronics retail market has shifted profoundly in recent years with the rise of online retailing and big-box stores like

Best Buy

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Circuit City

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. Meanwhile, the pace of consumer spending is now in question with interest rates rising, fuel prices soaring and the housing market cooling.

"While we knew first quarter would be weak, the results are worse than we anticipated," RadioShack said. "We clearly have a lot more work to do to get this company back to levels of profitability which we all expect. The first quarter results do nothing to change our belief in the turnaround plan announced early this year. We have made progress in implementing the plan, and we continue to be confident we are making the right moves that will benefit RadioShack significantly over time."

The company has completed only 40 of its 480 planned store closings under the turnaround, with the remainder expected to be shuttered by August. Charges resulting from the restructuring were largely taken in the first quarter. Still, Weinhart says there will be more pain before there's any gain.

"Earnings estimates

for RadioShack have not come down far enough, so therefore, I don't think the shares have come down far enough," Weinhart says. "A lot of folks were expecting them to do poorly this quarter, but these results are below even the lowest person on the street, which was me. So, I think there's still some more downside here."