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Why RadioShack Has Crashed in 2012

Today, Austin discusses RadioShack's (NYSE: RSH  ) enormous 60% crash thus far this year. Unfortunately for the electronic goods retailer, this could be a long-term problem. In addition to competing in a slowly deteriorating sector, RadioShack recently entered the mobile market. This move will force the company to slash margins, and it does not have the top-line growth to compensate for those losses. Most of all, though, it simply cannot produce a winning model. Companies like Amazon snatch revenue from traditionally profitable areas such as headphones, and razor-thin margins will sink the company. Austin thinks the slide reflects the direction of the company.

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Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Best Buy, and RadioShack. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (2)

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  • Report this Comment On July 13, 2012, at 5:34 PM, researcher11 wrote:

    Convenience. Personal Service. Niche Market. 7,200 locations.

    These are only a few of the reasons that you, and most other commentators, are dead wrong in predicting the demise of Radio Shack.

    7-11, Circle K and AM/PM Mini Marts sell the same thing that can be found for much less money at a full size grocery store, Costco or Wal-Mart. Yet, 7-11, Circle K, et. al., are still alive and prospering.

    Amazon, like Costco and Wal-Mart, will not eliminate this niche market.

    true, RSH's management is absolutely terrible and unqualified to be in office. But, as soon as they are replaced, along with replacing the lazy, inept Board which does absolutely nothing for its shareholders, this company could survive and prosper quite well in its little niche.

  • Report this Comment On July 14, 2012, at 9:21 AM, BenFE08 wrote:

    Totally agree with the above poster. RSH's upper management is absolutely to blame for this whole debacle, starting in 2006 when Julian Day (the Eddie Lambert protoge and wannttabe) was brought on board. Day brought Gooch (another Lambert disciple) with him and then proceed to form a team from Blockbuster who don't know their head from a hole in the ground about retail consumer electronics. Not one of them have any retail experience. You do NOT EVER put money people in charge of a retail operation and have it succeed.

    Smith is totally correct in that RSH's model has failed. And it will keep failing as long as they have people in charge with no retail experience. While the company may rebrand itself, it will fail UNLESS there is a competent business plan in place by people who actually ARE competent to run the business.

    They are getting slaughtered not only by on-line but other B/M companies who carry the same accessories at MUCH lower prices. And the bad thing is, it's the accessories that carry the higher profit margin, even at a much lower price. That's WHY RSH for years made $$$$$$$$$$$ off parts and accessories until the stupidity set in to put all the eggs in the cellular basket.

    Wonder why the value of RSH stock has steadily declined since 2006? Take a good hard look at upper management and you'll see why.

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