SHLD - Lampert and Day two peas in a pod.
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RadioShack encounters serious static
Commentary: CEO’s exit raises questions about direction
By MarketWatch
SAN FRANCISCO (MarketWatch) — RadioShack Corp. dropped a hammer on its own foot Monday, warning investors its fourth-quarter earnings are in going to fall short of expectations.
The company also announced that Chairman and Chief Executive Officer Julian Day is stepping down in May. After four years in the job, the former investment banker and the engineer behind Kmart’s turnaround has apparently met his match. Read about Radioshack's earnings warning.
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Needless to say, RadioShack (NYSE:RSH) shares tumbled on the news, falling 11% in the first hour of trade where they languished. They closed at $15.62, a 15-month low.
To anyone who’s shopped at RadioShack lately, this is probably not huge news. Politely speaking, their stores generally look tired. That happens when you’re under pressure.
And when it comes to displaying their wares, RadioShack can be a throwback to the cluttered corner hardware store where they might still have a board in the back for testing vacuum tubes. After all, it’s a “radio shack”, right?
But that’s just what meets the eye. RadioShack’s other big challenge is that store traffic remains their lifeblood in a business that’s now mostly on-line. Their bigger rival Best Buy (NYSE:BBY) is feeling the same pain. And the path to oblivion is littered with the names of such former competitors as Circuit City and Good Guys. This is a tough business.
The market’s sweeping shift to handheld devices, where thin margins demand huge sales volume, have also carved deeply into RadioShack’s earnings, and the company admits it’s T-Mobile business has been disappointing.
These problems didn’t pop up suddenly. RadioShack’s name often was batted around last year as a possible takeover candidate. The fact that no offers emerged says a lot about its shrinking value. So does the share price, down about 30% since the last good takeover rumor in October.
So is RadioShack destined to land in the bone yard of failed electronics retailers? Hard to say. While the company is still profitable, today’s news certainly doesn’t instill confidence. It could catch the eyes of the bottom feeders, however.
While Wall Street revises its price targets and the company’s fair market value, RadioShack shares are getting ever cheaper to buy.
The next four months will likely be critical for the company. If its margins don’t improve and if no takeover bids emerge before the shareholders meeting in May, its chance of turning things around soon appears slim. Investors know it. They also know there aren’t a lot of comeback stories in the electronic retail business.
— Jim Jelter |
