The Good, the Bad, the Ugly and the Somewhat Interesting

NEW YORK (TheStreet) -- Yesterday's second quarter earnings release by troubled electronics retailer RadioShack (RSH) lacked the shock value that I believe many were expecting. It certainly was not a good quarter; there were no revelations big enough to suggest that a turnaround has begun.

Likewise, there was no death blow, either. It was a mixed bag; better than expectations in some areas, and worse in others, best described as "the mildly good, the bad, the ugly, and the somewhat interesting".

The mildly good news, or perhaps most surprising news, was that revenue came in at $845 million, more than $30 million ahead of consensus estimates. This led to a bit of confusion in early trading, as shares opened the day up about 7%, before closing down 5%. Although revenue was down slightly from the same quarter last year, same store sales were actually in positive territory, up 1.3%, which was the first time that had happened since the fourth quarter of 2010.

Finally, the company's "high margin signature platform" generated same store sales growth of 6.4%. The company ended the quarter with $432 million in cash, well more than enough to pay off the $214 million in convertible debt that matures this year.

The bad news was that the better than expected revenue came at a price as gross margins fell from 40.1% last year to 37.2%, due in part to inventory reduction efforts. Same store sales of the company's consumer electronics platform were down 9.8%, although the company is moving away from that area.

The ugly news centered on the bottom line. Analysts expected a loss of 24 cents, and the company lost 53 cents, or $53 million. Had it not been for the revenue surprise, and a few other tidbits in the release, the stock probably would have suffered a much greater loss than it did.

There were also several mildly interesting bits of news, the first being that CFO Dorvin Lively has left the firm for the same role at Planet Fitness. He will be replaced in the interim by Holly Etlin, of turnaround firm AlixPartners. Secondly, after weeks of speculation, CEO Joe Magnacca announced that the company has indeed hired an investment banker, Peter J. Solomon Co, to assist in turnaround efforts.

All in all, neither the bulls, nor the bears, which I believe are much greater in number, got what they were looking for this quarter. RadioShack remains a troubled retailer, but one with new, proven leadership. Whether CEO Joe Magnacca will be able to transform this company, and lead it through the storm remains to be seen. I, for one, am aware of the risks here, but still believe that the company has more time to turn around than the market does. It is no doubt a tall order, and depends on getting customers back into the company's "re-merchandised" stores.

At the time of publication the author is long RSH.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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