Shack for sale: Petite retailer with retro charm in search of new owner. Needs updating. Sold as is, but marked down for a quick sale.
You know, unless there's a vulture business model with "We buy ugly retailers!" billboards, RadioShack (NYSE: RSH) may be back on its own after failing to smoke out interested suitors.
Shares of RadioShack opened nearly 10% lower this morning, after a Reuters report surfaced indicating that a joint bid for the company by private equity firms Blackrock (NYSE: BX) and TPG is no longer being pursued. This follows reports that Bain Capital picked up its hat and left the ring as well.
It's easy to see why private equity capital is backing away from the small box concept. Firms buy into companies they feel can be flipped for even more money in the future, and it's hard to fathom a scenario where RadioShack is more relevant in a few years.
There was certainly a time when the chain was a popular strip mall stop for batteries, television cables, and blank cassette tapes. But shoppers are no longer listening to Walkman tape players, while sporting wearing leg warmers, Jordache jeans, and Members Only jackets.
Entertainment retail has had it rough on this side of the dot-com revolution, and the demise of Circuit City and slow fade at Blockbuster serve more as ominous warning signs than drool-worthy opportunities.
Best Buy (NYSE: BBY) has been floated as a buyout partner, but how does that make any sense. Didn't it learn anything from its Musicland purchase fiasco? Even if it transforms smaller The Shack locations into stand-alone Best Buy Mobile or some other niche concepts, there's no reason why it can't just let RadioShack crumble and pick up the vacant suburban strip mall spaces from desperate landlords at a pittance.
RadioShack isn't going to die soon, though. It's profitable and backed by a decent balance sheet. The projected growth from last year's depressed state is steady and -- on the surface -- comforting. However, investors have turned quickly on small box chains, including RadioShack and GameStop (NYSE: GME), that appear vulnerable to future shopping trends.
GameStop's nemesis is the migration to digitally delivered video games. RadioShack's foe is the fact that even pharmacies, supermarkets, and convenience stores are carrying flash memory cards and recordable CD and DVD spindles.
RadioShack proved that it can't run with the big boys during last month's rollout of Apple's (Nasdaq: AAPL) iPhone 4, unable to honor some pre-orders with launch day availability.
So where does RadioShack go from here? It may be several years removed from when it had to can its CEO for padding his resume, but it's going to need more than its recent The Shack makeover to grow crowds beyond this year's uptick off of last year's recessionary levels.
If RadioShack thought that a bidding war would erupt, it probably forgot to update is calendar by a few decades.
Will RadioShack be trading higher or lower by the end of the year? Share your thoughts in the comment box below.
