Why RadioShack Corporation Stock Got Shocked

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 Corporation  (NYSE: RSHCQ  ) were shorting out again today, falling as much as 14% and finishing down 10% after the struggling retailer turned in another dismal earnings report.

So what: Radio Shack saw comparable sales plummet 14% as CEO Joseph Magnacca cited "an industrywide decline in consumer electronics" and a "soft mobility market due to lackluster consumer interest in the current handsets available." Overall revenue dropped 13% to $736.7 million, well below estimates at $767.5 million, and the drop in sales drove gross margin down 370 basis points to 36.5%. The company finished the quarter with a per-share loss of $0.97, down from $0.35 a year ago and worse than estimates of a $0.52 loss.

Now what: Despite the poor results, Magnacca said Radio Shack was "making progress on our turnaround strategy," seeing growth in its new concept stores and successfully cutting costs. Still, without the numbers to back up that statement, it's hard to buy into Radio Shack's potential as a turnaround. Magancca is correct that consumer electronics are facing an industrywide decline, but that is unfortunately not an excuse. After several quarters of losses, the company is facing cash concerns with just $61 million on the balance sheet, which should only force the stock price lower. Perhaps new phone releases could spice up sales, but operationally, RadioShack appears to be on its last legs. 

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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2/4/2015 10:18 AM
RSHCQ $0.13 Up +0.02 +0.00%
RadioShack CAPS Rating: *