True, RadioShack's fourth-quarter net income increased 19.5% to $101 million, or $0.77 per share. That's an impressive figure for a company that's been struggling over the years, but far less so when you ponder how total revenue decreased by 6.5% to $1.36 billion, and same-store sales dropped 6.7%. (Many of the elements present in yesterday's results have been the case for quite some time -- check out this Foolish take from last July, when RadioShack's increasing profits/dwindling sales refrain was the same.)
RadioShack's on a cost-cutting tear -- for example, it lowered SG&A expense significantly by reducing headcount at its headquarters and tinkering with work schedules in stores. Although Wall Street types tend to love penny-pinching turnarounds, there's only so much cutting that can be done before hitting bone. Without jumpstarting sales, it's just a short-term boost that can eventually start doing serious damage.
(Granted, I ought to give RadioShack some credit where it's due; the company's cash balance was $510 million at year-end, and it generated $334 million in free cash flow.)
Still, I'm not confident in RadioShack's ability to provide sustainable, long-term growth, especially with competitors like Best Buy
The "retro" flavor to the RadioShack brand also indicates a mature retailer with little prospect for growth in its store base; in fact, it's had to close stores down. It's a bit tempting to view RadioShack as a remnant of a bygone era. (Jurassic, perhaps?)
I have similar feelings about retailer Sears Holding
Check out some historical RadioShack stories:
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