At the time, the stock traded around $1.50 per share and was down 43% on the year. Right now the stock trades around 70 cents, down over 73% for the year to date. RadioShack has now lost roughly 80% of its value in 2014 alone. The company reports financial results Tuesday after market close.
It's hard to imagine these shares traded in the $20 range four years ago. It seems like a distant memory. It seems fitting. A little over a year the RadioShack name may only be remembered because it will no longer be seen.
Moody's Investors Service thinks RadioShack may run out of cash by as early as October 2015. Analyst Mickey Chadha said,
"Absent a credible turnaround strategy to improve sales growth and increase earnings, RadioShack will be hard pressed to remain relevant in the increasingly competitive mobile phone and consumer electronics business."
In the case of Radio Shack, management has failed time and time again. The company has had almost two decades to adjust to the emergence of Amazon (AMZN) and auction sites like eBay (EBAY) that have eroded RadioShack's in-store traffic and pressured its margins.
With no clear signs of a recovery, bankruptcy, as predicted by Moody's, now seems the inevitable outcome. Still, management isn't ready to give up the ghost.
All told, the company has opened up 40 of such stores over the past year, arguing, "Customers have expressed their desire to interact with products before they buy." But Amazon isn't making this claim. Neither is eBay.
RadioShack management is hoping these new concepts will give shoppers a new retail experience while promoting what management considers "unique products from tech savvy inventors."
Calls made to RadioShack requesting specifics on these "unique products" were not immediately returned.
I can only assume management's reference to the term "unique" also means "exclusive." But even if this is true, there's also the question of to what extent these products are different from highly marketed products currently on the market.
If RadioShack is already suffering from poor traffic, consumers will need to know what these products can do before they will walk in to interact with them.
In other words, I don't see how this new store concept, which presumably costs the company millions of dollars, will work. Given RadioShack's rate of cash burn, this is nothing but a case of throwing good money after bad.
Speaking of which, it doesn't make sense at this point for investors to double down on their investments. Dollar cost averaging is not a smart play right here -- not after a decade of failed promises. This afternoon RadioShack will likely report its tenth consecutive quarterly loss.
The company was healthy when every electronic device needed a battery. In the age of mobile devices and online shopping, RadioShack has lost its consumers. Despite this new store concept, they're not coming back.
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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 multiple weaknesses, 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, weak operating cash flow and generally disappointing historical performance in the stock itself."
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 127.0% when compared to the same quarter one year ago, falling from -$43.30 million to -$98.30 million.
- The debt-to-equity ratio is very high at 8.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, RSH has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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.
- Net operating cash flow has significantly decreased to -$37.80 million or 323.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 77.29%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 177.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: RSH Ratings Report