Electronics retailer Radio Shack
It's been a tough year for the Shack. Almost a year ago to the day, the company said it was confident that it would see 20% earnings growth over 2004's results, but the euphoria was short-lived. Just two months later, the company's sales fell; it realized that it would miss its first-quarter forecasts, and possibly its full-year predictions. It's been dialing down expectations all year long.
The drumbeat of disappointment grew as RadioShack's five-year relationship with Verizon ended. In switching to Cingular, founded as a joint venture between AT&T
One bright spot: Sales of personal electronics, including satellite radios, MP3 players, and digital imaging equipment, rose 13% for the year. Higher-priced, lower-margin products account for Radio Shack's 5% sales increase to $5.08 billion, though same-store sales were up only 1% for the year.
In contrast, competitors Best Buy
With a trailing price-to-earnings ratio of just 9 and a forward P/E of 11, investors are not showing much confidence in RadioShack's ability to turn things around anytime soon. The stock's neither particularly cheap nor expensive on an enterprise value-to-free cash flow basis, but the 27% decline in the stock price over the past year might just put it close to value territory.
First, though, it'll need to mend that disconnect between sales and profits.
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