Buyer's Remorse at RadioShack

To demonstrate just how often I frequent RadioShack (NYSE: RSH  ) stores these days, my visit two weeks ago triggered a fraud alert on my credit card. The transaction was legit but admittedly suspicious -- I can't remember the last time I made a purchase there. And though my particular experience is purely anecdotal, I think it speaks to the challenges RadioShack faces, which investors were reminded of this morning when it posted first-quarter results.

In many respects, the results looked quite decent; earnings of $0.30 matched analyst projections and sales of $949 million beat their expectations. But still, total sales fell 4.4% as same-store sales dropped 4%, the latter of which management attributed to "lower sales in Sprint (NYSE: S  ) postpaid wireless partially offset by strong sales increases in GPS units, prepaid wireless sales, video gaming, digital cameras and media storage."

CEO Julian Day stated he was "pleased with the overall outcome" of the quarter, as a tough January was followed by better sales and profitability trends in February and March. While selling, general, and administrative (SG&A) expenses fell, a lower gross margin from greater sales of lower margin items and increased promotional activity contributed to the 14% drop in operating income.

As we've been saying for a while now, cutting the fat at company headquarters and reducing overall costs can only take a company so far. Until sales trends improve, its long-term prospects remain hazy at best.

Investor patience appears to be running thin, as the share price has fallen back close to its 52-week low. The only reason I stepped foot into Radio Shack was because I had to replace a battery in a Radio Shack branded phone, leaving me with no other choice. I would have to say that at this point it's caveat emptor for current and prospective shareholders, primarily because I can't see why shoppers would head to RadioShack over rivals like Best Buy (NYSE: BBY  ) , Wal-Mart (NYSE: WMT  ) , or even embattled Circuit City (NYSE: CC  ) . These category killers sell a much wider array of goods, and many times, at a more competitive price.

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