<<.....might be a turnarund.>>
I sure hope not, otherwise I'll have made a mistake.
I don't see that there's anything to turn around except things the company cannot currently control so I hope they don't try to do anything except survive through Apple's turn at being supreme dictator of the universe ("you WILL stock our product and you WILL pay us handsomely to do so - we have so decreed") and the consumer spending slump.
This might be semantics, but to me a turnaround involves a company that needs to overhaul their business model because the current one sucks, or needs to clean out management.
RSH may need to tweak product mix a bit but the financials look good and BBY has basically stated that they plan to move toward the radioshack model (they didn't mention RSH by name, but they clearly state RSH's model), so at least someone thinks the model is fine (BBY could buy them for cash, incidentally, but a BBY purchase is NOT my thesis).
If you can believe the company, they have basically said (in code) that they are being raped by Apple and there's nothing they can do about it. They also blame consumer spending. And certainly online is a factor, and that will never go away, but I don't think it's a fatal factor.
IMO, RadioShack is currently priced with to reflect a creeping fear of CC's fate. All radioshack needs to do is show it can survive, even with lower margins and it's price will go higher.
For a company this size, you'll never see it at a discount to NCA so I actually am not looking for that here. Also if you adjust the balance sheet for leases, your $4 disappears but they do have some valuable hard assets.
I also like this "warning" from the 10-K: . We also may have difficulty negotiating real estate leases and purchase agreements on acceptable terms.
Take a look at the balance sheet and tell me what landlord is going to throw this tennant out under current conditions. In fact, I think negotiating risk rests with the landlord.
At any rate, this one looks pretty simple to me. The financials are easy. The basic thesis couldn't be simpler: the market merely needs to be convinced that they'll survive and you'll get a return on a purchase at the current price. |
