RadioShack Q2 Loss Wider than Expected, Revenues Miss

RadioShack Corp. (RSH) posted dismal quarterly numbers for the second quarter of fiscal 2015 with both the top and the bottom line missing the respective Zacks Consensus Estimate.

GAAP net loss from continuing operations in the second quarter stood at $137.4 million or a loss of $1.35 per share compared with a net loss of $51.4 million or a loss of 51 cents per share in the year-ago quarter. Also, adjusted loss per share of $1.00 was wider than the Zacks Consensus Estimate of a loss of 59 cents. Meanwhile, total revenue came in at $673.8 million, down 21.8% year over year and below the Zacks Consensus Estimate of $742 million.

Notably, comparable store sales for company-operated stores and kiosks (stores and kiosks that have been operational for at least a year) were down 16.9% in the reported quarter mainly affected by traffic declines and slowdown in the mobility business. This is a key retail performance indicator measuring growth from existing sales locations.

Quarterly gross profit was $237.6 million versus $301.5 million in the prior-year quarter. Gross margin stood at 35.3% compared with 35% in the comparable year-ago quarter. Selling, general, and administrative expenses totaled $323.6 million against $334.4 million in the year-earlier quarter. Operating loss was $119.4 million compared with an operating loss of $51.1 million in the year-ago quarter.

RadioShack consumed $87.2 million cash flow from operations in the second quarter against cash flow generation of $59 million in the prior-year quarter. At the end of the quarter under review, RadioShack had $30.5 million in cash & cash equivalent compared with $109.6 million at the end of Feb 1, 2014. Total debt, at the end of the reported quarter, stood at $656.9 million versus $613 million at the end of Feb 1, 2014. The debt-to-capitalization ratio was 1.1 compared with 0.78 at the end of Feb 1, 2014.

Our Take

The share price of RadioShack is facing significant volatility in the past few days. Also, over the last two days, the stock price witnessed a sharp fall of nearly 24% to 93 cents. Moreover, the company experienced intraday volatility in the range of 76 cents to $1.09. To worsen matters, RadioShack may even face bankruptcy going ahead.

RadioShack is facing intense competition from larger rivals like Best Buy Co. Inc. (BBY) and Wal-Mart Stores Inc. (WMT). Best Buy is gradually rolling out small mobile stores and plans to open another 600 to 800 stores within the next five years. This, in turn, will negatively impact RadioShack’s market share. Meanwhile, the company is facing severe competition from leading online retailer, Amazon.com Inc. (AMZN).

RadioShack currently carries a Zacks Rank #3 (Hold).