RadioShack Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronics retailer RadioShack (NYS: RSH) were radioing in an S.O.S. today as they fell as much as 30% in intraday trading after a disappointing announcement from the company.

So what: It wasn't a terrible earnings release, but it was close. The company preannounced fourth-quarter results and investors did not like what they saw. Promotions during the holiday season and softness in its business around Sprint Nextel (NYS: S) phones were cited as key issues as the company told investors that earnings per share for the quarter will likely come in between $0.11 and $0.13. Wall Street analysts were expecting $0.37.

Adding to the disappointment was the additional announcement that the company is turning off the share-repurchase spigot.

Now what: As my fellow Fool Rick Munarriz pointed out, sales were not the big issue -- sales were actually up 6%. However, gross margins slipped from 41% to 35%, reflecting the lower profitability of the stores' sales mix. The question for RadioShack investors to ponder going forward is whether -- as Rick believes -- the lower profitability is here to stay, or whether this is a hiccup and management can fatten the bottom line back up in the quarters ahead.

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At the time this article was published The Motley Fool owns shares of RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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