RadioShack (NASDAQ:RSH) shares took quite a beating last Friday when the company warned that a slowdown in wireless sales will have a negative impact on its first-quarter results. This is a situation that some might argue has been coming for a long while.
RadioShack gave investors a bit of a chill when it said that first-quarter earnings wouldn't be as good as expected (and it warned on the entire year, no less). Slower wireless sales and slower sales of batteries were both to blame.
The company now expects first-quarter earnings of $0.30-$0.34 per share, as compared to its old view of $0.39-$0.41 per share. Ouch. Meanwhile, RadioShack said it doesn't expect to achieve its full-year earnings expectation, which was previously for earnings of $2.34-$2.40 per share.
It might have been a day many of us were waiting for -- in the way that one waits for the other shoe to drop. As far back as last summer, some of us wondered just how long RadioShack would be able to squeeze profits out of slim sales gains -- and wondered just how long the wireless party would last, considering that was a very prominent element that seemed to be consistently going well for RadioShack, sales-wise.
Meanwhile, as Seth Jayson has expressed in the past, how could RadioShack keep up the profits, selling mostly wires, solder, batteries, and so forth, especially when most consumers think of big boxes like Motley Fool Stock Advisor stock Best Buy (NYSE:BBY) and Circuit City (NYSE:CC) for most of their big-ticket electronics needs?
And while RadioShack aspires to greatness through new initiatives and a focus on its catch-phrase -- "You've got questions. We've got answers." -- I was stymied when I recently made an emergency stop at my local RadioShack for an ink cartridge for my new printer. The sales guy called it a "printer cartilage." It made me wonder what kind of answers he had, you know?
At any rate, I've wondered for a long time when the cell phone frenzy would die down, leaving RadioShack floundering with its sales of small-ticket items like cables and other such widgets. There will always be ebbs and flows of upgrade cycles for cell phones with new features and price points; if this is the tide receding, RadioShack may have a bit of a disconnect with its long-term outlook for the time being.
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Alyce Lomax does not own shares of any of the companies mentioned.
