Why RadioShack Stock Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of RadioShack (NASDAQOTH: RSHCQ  ) were getting pummeled once again today, falling as much as 25% after the electronics retailer posted yet another dismal earnings report.

So what: The Shack missed earnings estimates by $0.76, reporting a loss of $1.11 a share on expectations of a $0.35 loss as sales tumbled 10.4% to $805 million. Same-store sales similarly fell 8.4% due to lower sales in all the company's product categories. RadioShack also confirmed that it would be receiving $835 million in financing repayable over the next five years from a group of lenders. Despite the rough quarter, new CEO Joseph Magnacca noted that the company "is moving forward quickly with its turnaround efforts," which included rolling out more than 100 concept and brand statement stores.

Now what: In an age of big-box stores and online retail, RadioShack appears to be getting squeezed in the middle, and a comparable sales drop of 8% is certainly ugly. Magnacca tried to put to rest any doubts about the retailer's solvency, saying it had $613 million in liquidity, and there is still hope for the electronics retailer. Just as Best Buy's shares experienced a turnaround on a number of new initiatives, including in-store Samsung kiosks, there is an opportunity for RadioShack to do the same by homing in on its growth products such as prepaid phones, speakers, and Apple accessories as well as its new concept stores. Time will tell if the strategy will pay off, but until then, the stock will remain an extremely high-risk play. 

An easier way to invest
Turnaround plays may seem appealing at times, but there are easier ways to invest. Just take a look at "The Motley Fool's 3 Stocks to Own Forever," which features a group of stocks with the competitive advantages to keep growing over the long haul.. These picks are free today! All you have to do is click here now to uncover the three companies we love. 

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: 2693814, ~/Articles/ArticleHandler.aspx, 9/30/2016 3:11:03 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 5 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

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

12/31/1969 7:00 PM
RSHCQ $0.00 Down +0.00 +0.00%
RadioShack CAPS Rating: *