RadioShack's Earnings Likely to Provide More Reasons for Worry

NEW YORK (TheStreet) -- RadioShack (RSH) plans to report financial results for its fiscal first quarter before the opening bell Tuesday. Saying that RadioShack has struggled over the past couple of years would be a gross understatement.

Shares closed Friday at $1.47, down 2.7%, and have plummeted 43% year to date.

Although RadioShack has established a rich history as an electronics retailer over the past five decades, the emergence of Amazon (AMZN) and auction sites such as eBay (EBAY) have eroded RadioShack's in-store traffic and pressured its margins.

And when you factor in the company's high inventory levels, declining cash reserves and upcoming debt maturities, you have to ask how much time does RadioShack have left before it has to file for bankruptcy.

Management continues to make attempts to turn things around.

Last week, RadioShack announced that it had formed a partnership with hardware manufacturer PCH International.

PCH International's PCH Access unit helps start-ups manufacture and bring their products to market.

The RadioShack partnership, called RadioShack Labs, will make these products available in designated spaces at RadioShack stores.

It remains to be seen how much of a difference this new partnership will make in an Amazon/online-dominated world, though.

You can bet that analysts will ask plenty of questions about PCH International when RadioShack reports earnings Tuesday.

They'll also be asking what else management plans to do to stop the current bleeding.

The Street will be looking for a loss of 52 cents per share on revenue of $767.4 million, representing year-over-year declines of 48.5% and 9.6%, respectively.

Assuming there is no upside surprise in the results, this will be RadioShack's ninth consecutive quarterly loss.

In the March quarter, the company's net loss widened to $191 million from $63.3 million in the March quarter of 2012. That's a two-year decline of 202%. Even gloomier, full-year revenue declined from $4 billion (with a "b") in 2011 to $3.4 million (with an "m") in 2013.

Over the past couple of years, management has tried to meet the changing needs of consumers by shifting the product mix to low-end smartphones. To that end, it formed wireless partnerships with T-Mobile US (TMUS) and Sprint (S). But these efforts have done little to help the company's bottom line.

There is hope that an agreement with Verizon (VZ) will help turn the wireless business around. But it will only cost RadioShack more money to market that relationship.

With no clear signs of a recovery, investors still holding these shares from the $20-plus highs of four years ago should let go now and move on with their lives. Those days are gone. Bankruptcy now seems the inevitable outcome.

At the time of publication, the author held no positions in any of the companies mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read More:
Will RadioShack Be Helped by the Deal with PCH International?
Why Amazon's Smartphone Needs More Than 3-D to Beat Apple's iPhone

More from Opinion

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3