4 Red-Shirt Retailers Destined to Die

Fans of the original Star Trek series know that being beamed down on a U.S.S. Enterprise mission while wearing a red shirt can be hazardous to your health.

The extras typically cast as engineering, security, and operations characters accompanying the show's stars -- standing out in their red shirts -- were easy pickings for the baddies. They may beam off the ship with confident swagger, but they're destined to perish as casualties of intergalactic combat.

Star Trek Into Darkness hit theaters this weekend, so I figured now would be a good time to go over a few stocks destined to perish. These stocks bounced nicely off their recent lows, but they're most definitely wearing red shirt.

Everyone but the longs know how things will end.

RadioShack (NYSE: RSH  ) : Up 121% since hitting 52-week low
Why are we excited about RadioShack again? The retailer's push into mobile has gnawed away at margins, and there's little left to get excited about here.

Sales fell in 2012, and analysts see another slide this year and yet again in 2014. RadioShack posted a loss last year, and Wall Street sees annual deficits continuing through at least 2016 -- and that's if the chain even lasts that long.

RadioShack may have thought it could use its attractively leased strip-mall locations to stand out by offering wireless devices across the major carriers, but telco providers know how to keep customers buying directly after they land them.

Best Buy (NYSE: BBY  ) : Up 140%
The consumer-electronics superstore reports on Tuesday, and analysts are already braced for a sharp drop in profitability and a modest decline in revenue.

Best Buy is in much better shape than RadioShack. It's profitable, at least. However, what becomes of these cavernous stores that used to stock CDs, DVDs, and video games as media consumption continues to migrate away from physical copies?

Right now, Best Buy benefits from the digital migration as folks buy tablets, smartphones, and smart TVs from Best Buy -- but what happens when they don't need to return to Best Buy for media? What happens when more people realize that these same products can be had for less online? Best Buy will need to shrink its footprint in the coming years or start selling boats and RVs.

Spoiler alert: Best Buy won't be selling boats and RVs.

GameStop (NYSE: GME  ) : Up 160%
Video-game sales have been falling for three years. New consoles rolling out this holiday season will emphasize digital delivery, bypassing physical retailers. GameStop's highest-margin business -- selling used games and gear -- has been falling off as gamers tire of traditional games and developers move to prevent the popularity of the resale of titles, leaving them out of the revenue-recognition loop.

So why exactly did GameStop hit a new 52-week high on Friday?

GameStop's been rallying given a huge short position that's getting squeezed out, but just wait until Thursday's quarterly report. It's the bulls who should be getting nervous here, especially after GameStop slashed its same-store sales guidance four times in its most recent fiscal year.

Barnes & Noble (NYSE: BKS  ) : Up 79%
Have you ever read a book knowing exactly how it's going to end? I can do that for Barnes & Noble. It's final chapter will end with these three words: "just like Borders."

I'm not being cruel. Barnes & Noble is selling books while digital e-readers are taking over. Yes, Barnes & Noble is a force in that space with its Nook, but the market is too cutthroat for Nook to ever catch up to Kindle as the digital book platform of choice.

Microsoft (NASDAQ: MSFT  ) turned heads after a sizable investment in Nook last year, and now the chatter suggests that the software giant may want to swallow Nook whole. It's certainly possible. Microsoft has a funny way of overpaying.

However, with or without this deal, what becomes of Barnes & Noble? It's in the same boat as Best Buy, with stores that are too big given the downward spiral of book sales.

Barnes & Noble has lost money in its past two fiscal years, and Wall Street sees that trend continuing for the next few years. Sales have been slipping and will probably continue to slide. This certainly seems a lot like Borders.

Beam me down, Scotty
These four red-shirted retailers won't perish at the same time.

RadioShack will be an early death. Barnes & Noble should follow shortly, especially as investors realize that its cash-sapping Nook business isn't as valuable as Microsoft thinks it is.

GameStop and Best Buy may last a little longer. GameStop's model is still very profitable, and its balance sheet is solid. That may be enough to have it outlive Best Buy, even though its model will perish first.

One way or another, these confident stocks aren't going to beam back up alive.

Live long and prosper
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