Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of RadioShack (RSHCQ) jumped nearly 20% early Thursday after the company saw an "improving sales trend" in its retail business during its most recent quarter. CEO Joseph Magnacca also insisted they are in "advanced discussions with a number of parties" to identify a long-term solution to stave off bankruptcy.
So what: Still, lower traffic and a weak mobility business led to a 20% decline in comparable-store sales, which led to a nearly 22% year-over-year drop in quarterly net sales to $673.8 million. That translated to an adjusted loss $101.5 million, compared to a loss of $62.9 million this time last year.
As of Aug. 2, 2014, RadioShack had liquidity of $182.5 million, including $30.5 million in cash and equivalents and $152 million available under its 2018 credit agreement, and total debt of $658 million.
Now what: RadioShack also said some of those plans will require the permission of its lenders, who have been less-than-accommodating so far by preventing the closure of as many stores as it previously requested to pursue its turnaround. As a result, RadioShack warned in a regulatory filing it may need to pursue Chapter 11 bankruptcy as it "may not have enough cash and working capital to fund our operations beyond the very near term."
In the end, given the very real threat RadioShack's equity could be wiped out as a result, I'm convinced investors would be wise to stay far, far away.
