Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (11161)	7/16/2007 3:02:42 PM
From: Smiling Bob	Respond to of 19256

Traders Tune Out RadioShack Joshua Lipton, 07.13.07, 6:25 PM ET RadioShack, under the reins of Chief Executive Julian Day, has embarked on an ambitious turnaround strategy focused on cost-cutting initiatives. That campaign has resulted in some investor-pleasing earnings announcements, but it's those very cost cuts that could hurt the company in the long run. The electronic retailer has slashed costs, closing 500 unprofitable stores and laying off employees from the Fort Worth, Texas, corporate headquarters. That strategy bolstered earnings results and left investors enthusiastic about the stock's prospects. (See: "RadioShack Rocks.") But the quick fixes put in place by RadioShack haven't pleased every stock watcher. David Strasser, analyst at Bank of America, isn't a believer. On Friday, he wrote in a client note that turnarounds like Radio Shack's provide short-term returns but also dramatically increase the company's risk profile once chinks appear in the armor. Strasser argued that cuts to labor costs and advertising expenses will make it more difficult for Radio Shack to overcome declining wireless sales trends, leading, he said, to disappointing comparable-store sales and declining gross profit for the foreseeable future. "We believe RadioShack has 1-2 more quarters left of optically 'in line to better' earnings led by steep SG&A cuts, but poor earnings quality signals larger issues heading into 2008," he wrote. More broadly, Strasser said that the feelings among the RadioShack worker-bees aren't so enthusiastic these days. He said that, based on store checks and industry sources, morale at store level is poor, as commissions have been slashed and benefits cut. The result? Strasser decided RadioShack was due for a downgrade. He dropped the company to "sell" from "neutral." He slashed his 12-month price target by $8 to $18. Traders responded to the report, sending shares of the company down 6.4%, or $2.12, to $30.75.