Why RadioShack Shares Dropped and Ulta Popped

The Dow crept to another record as RadioShack tumbled and Ulta jumped after hours.

Jun 10, 2014 at 10:00PM

Stocks finished flat today, though a small gain by the Dow Jones Industrial Average (DJINDICES:^DJI) gave the blue chips their fourth straight record finish as the Dow closed 16,945, up just 3 points. With the market at record highs and the VIX, or volatility index, near multi-year lows, there has been little news pushing investors to buy or sell in recent days. There seems to be a sense that the market is fully valued, but every time stocks pull back, buyers have come in to keep them near record levels.

Volume was also below average again today, indicating a sense of complacency among investors. There were no major economic reports released today, though the closely watched retail sales report is due out on Thursday, which could move the market. 

Among stocks making headlines today was RadioShack (NYSE:RSHCQ), which finished down 10% after turning in another gaping loss in its quarterly earnings report. The struggling electronics retailer posted a loss of $0.97 a share, down from a $0.35 loss a year ago, and worse than estimates of a $0.52 loss. Same-store sales dropped 14% as CEO Joseph Magnacca cited industrywide weakness in consumer electronics and soft mobile sales resulting from a lack of enthusiasm for current available handsets. While Magnacca pointed to positives in the company's turnaround strategy, such as growth at its concept store and cost-cutting measures, with just $61 million in cash, liquidity concerns are beginning to mount. If sales keep slipping, RadioShack may soon go off the air.

After hours, shares of Ulta Salon (NASDAQ:ULTA) were moving in the opposite direction, up 10% on a strong earnings report. The beauty-products chain saw comparable sales improve 8.7%, driving a 22.7% jump in revenue 22.5% to $713.8 million. That beat the analyst consensus of $699.7 million. Earnings also improved from $0.65 a share to $0.77, ahead of estimates at $0.74. E-commerce sales, which are included in comps, were particularly strong, growing 72% in the quarter as the company is growing through organic sales at its current stores, on the online platform, and through new stores, 21 of which opened the past quarter. Looking ahead, Ulta expects more strong growth ahead, as sales are projected to grow close to 20% in the current quarter. Management forecast a range of $706 million to $717 million, ahead of estimates at $703.2 million. EPS guidance of $0.78 to $0.83 was more modest as the company spends to convert customers to its new ULTAmate rewards program. WIth strong revenue growth streams ahead and shares trading at a discount, this could be a good time to pick up shares of the beauty salon.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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