Yeah, A few more months and I'm guessing somewhere between 100-200k was mine.
KBH up a bit today. I may be adding puts. Considering thinning down on RSH, but that should tumble a good bit more as the facts are spelled out.
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RadioShack Picture Turns Fuzzy
R.M. Schneiderman, 03.13.07, 4:47 PM ET
When RadioShack reported fourth-quarter earnings on Feb. 27, investors appeared supremely impressed by the electronic retailer's cost-cutting measures.
Indeed, Chief Executive Julian Day's strategy of closing more than 500 unprofitable stores appeared to encourage stockholders that RadioShack was recovering from its 2005 cell phone carrier change. The retailer abandoned Verizon in favor of Sprint-Nextel, and Cingular, now part of the new AT&T, which led to a decline in wireless plan purchases and customer confusion (See "RadioShack's Debt Rating Cut").
Yet the effects of those improvements may soon be running out, according to a Tuesday report by RBC Capital Markets.
"RadioShack did an impressive job reducing its cost structure in the fourth quarter, which should flow into the first half of 2007," said Scot Ciccarelli, an analyst for RBC Capital Markets. "However, we expect these improvements to moderate in the second half of 2007, as we believe the 'big cuts' are now behind it."
That means the company may not be able to reach an operating profit margin of 8%, which investors appear to be anticipating.
Indeed, in RadioShack's own 10-K form, the company stated: "As of December 31, 2006, we considered our turnaround program to be substantially complete."
Ciccarelli took that to be a bad sign. "Historically, it has been very dangerous to assume a company will perform materially better than what it has outlined in publicly filed documents," he said.
The analyst also said that the loss of earnings from Verizon will be difficult to replace, and that will continue to weigh on the company's profit margins.
Worse still, "competitors are doing a better job of accessorizing core product sales" selling additional items like phone cords, speaker wire, belt clips and headphones for cell phones, Ciccarelli said.
"We have watched for nearly 15 years" he wrote "as the company has switched back and forth between focusing on driving sales and improving margins. Both are admirable goals, but very few product categories provide the opportunity for the company to capitalize on both fronts simultaneously."
Ciccarelli downgraded the company to "underperform" from "sector perform" on Tuesday. RadioShack fell 4%, or $1.05, to close at $25.14.
-The Associated Press contributed to this report |
