Shares of RadioShack (NASDAQOTH:RSHCQ) fell by more than 20% during Thursday's intra-day trading, after reports surfaced saying the electronics retailer is considering hiring a financial advisor to help fix its balance sheet. By the end of the day, however, the stock did manage to recoup the majority of its losses to close down just 7%.
Cash and debt and inventories... oh my!
To be sure, on one hand, an April SEC filing showed RadioShack had around $820 million in total liquidity at the time, including $435 million in cash, and $385 million in available credit under an asset-based revolving credit facility that expires in January, 2016.
On the other hand, the filing also stated RadioShack had $712 million in total debt at the end of last quarter, including more than $216 million in convertible notes coming due on August 1, 2013, which is just over two weeks from now. Meanwhile, the balance of the debt will come due between 2016 and 2019.
Of course, that wouldn't necessarily be a huge problem if RadioShack didn't make it a habit of repeatedly turning in sub-par earnings reports. Last quarter, for instance, RadioShack's revenue fell 7%, to $849 million -- missing analysts' expectations for sales by more than $100 million -- as same-store sales decreased 5.7%.
Meanwhile, the company lost $43 million during the quarter, compared to a net loss of just $8 million in the same year-ago period. Then again, that loss was also exaggerated by an additional $8.5 million hit from the unprofitable joint venture with Target Mobile, the end of which RadioShack finally announced in February. That said, even without the Target Mobile losses to contend with, $34.5 million in red ink is nothing to smile about.
Finally, those falling sales have made it difficult for RadioShack to reduce its bloated inventories, which grew over the past year by nearly $200 million to just over $926 million at the end of March.
There's no place like home
Unfortunately, while RadioShack's balance sheet woes are very real, you can bet there's no easy heel-clicking fix for its troubled operations. Today's drop shows that I'm certainly not alone in worrying that this is one business beyond saving, no matter who they might decide to bring on as a financial advisor.
To be honest, this move also seems a little too close to a desperate cry for help from a business whose challenges appear insurmountable in the face of stiff competition from stronger retailers like Best Buy and Amazon.com (NASDAQ:AMZN). To be sure, as fellow fool Sean Williams also asserted recently, RadioShack can no longer rely on its former sterling image, or even its ability to stock the right products, to entice customers to actually shop in its stores.
Remember, Amazon, for its part, managed to increase its own sales by 22% year over year last quarter, and it doesn't even need to coax customers to walk through any brick-and-mortar doors to succeed. To the contrary, Amazon's fanatical pursuit of improved efficiency, all in the name of offering lower prices, has enabled it to serve as the primary beneficiary of consumers' recently adopted "showrooming" habits, thereby allowing it to achieve much of its revenue increases at the expense of traditional retailers like The Shack.
Then again, RadioShack does still have some time and money to at least try to execute on its hopeful turnaround plans, and perhaps a financial advisor will be able to find a novel way to buy them more time to do so.
In the end, though, until RadioShack can show us some truly tangible signs of a sustained turnaround, it will remain a risky speculative bet that I'm unwilling to take.
Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.