Why RadioShack (RSH) Stock Is Falling Today

NEW YORK (TheStreet) -- RadioShack (RSH) was falling 10% to $1.52 Thursday following a report that talks with lenders is delaying planned store closings announced in March.

According to The Wall Street Journal, RadioShack is still in negotiations with its lenders regarding plans to close up to 1,100 stores across the U.S. The retailer's credit agreements only allow it to close 200 stores without approval of its lenders.

RadioShack is reportedly still planning on closing stores, and it now looking to close just 200 locations. Some landlords have reportedly agreed to lower rents to keep some stores open.

Some lenders may want RadioShack to close as many as 2,000 stores, or almost half of its 4,300 total locations.

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TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 202.4% when compared to the same quarter one year ago, falling from -$63.30 million to -$191.40 million.
  • The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RSH maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, RADIOSHACK CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 29.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.46% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$139.80 million or 85.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RSH Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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