Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



RadioShack at the Crossroads

When we last checked in with RadioShack (NYSE: RSH  ) , the gadgets retailer was showing some remarkable resilience. It had turned a slim 2% sales increase for the holiday season into a 22% earnings jump.

This week's first-quarter results look like more of the same. The Shack's revenues were up another 2% to $1.1 billion, but earnings managed to scramble up 24% compared with the same time last year, to $0.41 per share. Comparable-store sales increased 3% for the quarter.

While Radio Shack's definitely displayed the Midas touch for the past few quarters, the concern -- the same one we had last time around -- is that the party can't go on like this forever. Most of the firm's sales categories experienced a bit of shrinkage, though, wireless phone sales were up 28%, with growth in both the Sprint PCS (NYSE:PCS) and the Verizon (NYSE:VZ) units.

Regarding other merchandise, better deals with suppliers and fewer markdowns made RadioShack even leaner and meaner than before, but someday, the firm is likely to run out of ways to squeeze the juice out of existing sales.

Mr. Shack, your mission is clear: Get more sales. Management is aware of this need and has outlined plans to try to sell more batteries and parts. That, I believe, is a key goal. Hey, bits and pieces are the only reasons I stop by my neighborhood store. Does anyone really believe the firm can compete with giants such as Best Buy (NYSE: BBY  ) , Circuit City (NYSE: CC  ) , or even Wal-Mart (NYSE: WMT  ) on consumer electronics?

Investors seem to be getting edgy, as the stock has gradually dropped from the 52-week high it hit back in February. I'd be edgy. too. This year's free cash flow is expected to come in around $70 million, a far cry from the $422 million last year. Near $32 per share today, and with a P/E ratio of 17 on slim and -- to my mind -- endangered earnings growth, RadioShack looks overpriced.

Best Buy is one of David Gardner'sMotley Fool Stock Advisorrecommendations. To see what else has made the cut, sign up for six months with a money-back guarantee.

Fool contributor Seth Jayson is nerdy enough to know where the solder is at his local RadioShack. He owns no company mentioned above. View his Fool profile here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 507171, ~/Articles/ArticleHandler.aspx, 10/24/2016 12:04:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:03 PM
BBY $39.46 Down -0.02 -0.05%
Best Buy CAPS Rating: *
CC.DL2 $0.10 Down +0.00 +0.00%
Circuit City Store… CAPS Rating: *
RSHCQ $0.00 Down +0.00 +0.00%
RadioShack CAPS Rating: *
TMUS $46.75 Down -0.30 -0.64%
T-Mobile US CAPS Rating: ***
VZ $48.20 Down -0.94 -1.91%
Verizon Communicat… CAPS Rating: ****
WMT $68.34 Down -0.39 -0.57%
Wal-Mart Stores CAPS Rating: ***