2014 has not been kind to RadioShack Corporation (RSHCQ). The stock has fallen nearly 70% as losses pile up and its cash balance dwindles, but the company was already on shaky ground when the year began. Debt was more than three times cash on the balance sheet, and the company was coming off two straight years of losses and negative free cash flow. In 2013, the company saw a shortfall of $400 million on the income statement, and badly missed earnings estimates several times along the way. Hope remained that RadioShack's new concept stores could help save the company, but 2014 has only brought more pain to investors. Here's a look at the trials and tribulations of RadioShack over the course of the year:
- Jan. 3-Jan. 17: To kick off the year, shares fell more than 20% to $2.04 due to increasing short-selling as investors bet on the company's failure.
- Jan. 18-Feb. 3: The stock spiked to $2.54, gaining 17% in one day on reports that the hedge fund Litespeed Management took in the retailer. The stock got another bump on rave reviews for its Super Bowl ad, popping as much as 12% in intraday trading.
- Feb. 4-March 3: Just one day later, the stock tumbled again after the company announced a plan to close 500 stores over the next few months, sending the stock down 10% in two days to $2.22. Shares recovered shortly and rallied over the course of February on no major news, peaking on March 3 at $2.72, the day before its earnings report came out.
- March 4-March 6: The Shack badly missed the mark in its fourth-quarter earnings report, posting a per-share loss of $1.46 against expectations of a loss of just $0.14 per share, and expanded the number of store closings to 1,100. Same-store sales plummeted by a whopping 19%. The stock fell 17% on the day of the report, and lost another 9% over the next two sessions.
- April 10-April 23: After hovering around the $2.20 mark for the next month, the stock went off a cliff, losing more than a third of its value as peer retailers turned in poor results and reports came in that RadioShack creditors were resisting its plan to shutter 1,100 stores, invoking covenants that said the company must liquidate if it closes more than 200 locations.
- May 8-May 19: The company killed its plans to close 1,100 stores, amending it to 200 stores in accordance with the demands of two large creditors. Shares dropped 10% that day and fell below $1.20 after Fitch Ratings downgraded the company.
- May 20-June 10: The stock climbed back above $1.50 on the strength of some bullish options bets, leading up to its first-quarter earnings report, but promptly tumbled once the report came out on June 10.
The stock fell 25% in the three days following the report as the retailer posted an adjusted loss of $0.98 per share on a 14% drop in same-store sales. Since then, the stock's demise has only hastened as investor concerns about its liquidity intensify. On June 20, shares fell below $1 for the first time ever, raising the possibility that it could be delisted from the New York Stock Exchange, and the stock has remained under $1 since.
Where RadioShack stands today
Liquidity is the biggest concern for RadioShack right now. Unlike other seemingly failing retailers such as J.C. Penney and Sears, RadioShack is not only experiencing massive losses, but also has severe cash burn problems. As of its latest quarterly report, the company had just $61.8 million in cash, and $423.7 million in total liquidity, including a credit facility of which it's already drawn $35 million since its last report.
Analysts expect the company's wide losses to continue this year and next, forecasting a per-share loss of $3.34 this year and $2.76 next year, and recent estimates have proven to be wildly optimistic, meaning the actual numbers could be much worse. On top of the operational burden, the company is carrying over $600 million in debt, forcing $16.6 million in interest expense in the first quarter. Free cash flow was negative $50.7 million in that period as well.
Foolish bottom line
RadioShack is far from the only electronics retailer struggling these days. Shares of hhgregg are down 32% this year as the big-box chain has faced similar problems with comps declining sharply, and has chosen to focus on furniture sales to stem the losses from electronics. Shares of Best Buy, the industry leader, are down 23% this year. When an entire sector is getting crushed, it's a sign that the challenges facing the individual companies in that industry are beyond their own missteps and the scope of their influence. Online retail is pressuring brick-and-mortar stores, enthusiasm for new smartphones is waning as that category matures, and Radio Shack's brand identity as the place to buy electronics parts feels dated.
Losses are mounting at an accelerating pace, and the company could burn through its remaining cash by the end of the year. Its emergency plan, closing 1,100 of its most unprofitable stores, was vetoed by its creditors. At this point, it's hard to see anything but a small miracle being able to save the company.