Can RadioShack Bounce Back?
It wasn't a good week to be long RadioShack . Shares of the small-box retailer of consumer electronics surrendered 11% of its value last week.
The week seemed to be off to a strong start after RadioShack was able to secure $835 million in financing, but then the struggling chain posted another weak quarter. Yes, there was more red ink at RadioShack, but the problem is that the customer exodus continues.
Same-store sales slid 8% for the period. That follows a 1.6% slide during the same quarter last year, and a 4% decline during the third quarter of 2011.
In its profitable prime, RadioShack was able to easily cover landlord payments for its small-box locales. RadioShack is still covering rent, but it's not able to turn a profit. Last week's quarter stretches RadioShack's problematic streak of deficit-saddled quarters to seven.
Bulls will argue that we still haven't given CEO Joseph Magnacca a chance. He came aboard in February, and before joining RadioShack he oversaw marketing and merchandising operations across more than 8,000 Walgreen drugstores. The problem is that RadioShack isn't a Walgreen's store. There are no pharmacy prescription refills to woo shoppers regularly. In the old days -- before Amazon.com was around -- if you needed a coaxial cable or blank videocassettes, RadioShack was there. It was conveniently located at a suburban strip mall near you with accessible parking. There isn't such a pressing need for RadioShack's gadgetry, and that explains why it moved to emphasize wireless products and services a couple of years ago.
There was one positive development for RadioShack last week. Amazon boosted its Free Super Saver Shipping minimum order amount from $25 to $35. There are enough RadioShack items in that pricing sweet spot below $35 where it may pick up some business here. However, it's unlikely to be enough to offset the customer defections that have taken place in recent years.
If there is a model to be had selling consumer electronics in a small-box location, wouldn't Hollywood Video or Blockbuster have thought about it first? The new CEO has a determined vision on what he thinks will serve RadioShack well this holiday season, but a quick peek at RadioShack.com finds the same assortment of smartphones, tablets, and fitness bracelets that one can secure for less through Amazon or a wireless carrier.
RadioShack's new financing will buy it time that it needs, but it's hard to fathom a scenario where RadioShack is more relevant with consumers in the future.
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The article Can RadioShack Bounce Back? originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. 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. The Motley Fool has a disclosure policy.
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