On Dec 31, 2014, we issued an updated research report on RadioShack Corp. (RSH).
In an effort to ramp up sales, this beleaguered electronic and mobile products retailer has, of late, redesigned its retail website with new deals in the offing. However, despite such efforts, the company’s shares have plunged more than 50% over the last one month.
RadioShack has launched two fresh concept stores in China and Malaysia. The company also plans to expand its presence in the Asian market by opening stores in the coming years. The company, along with its franchise partner Berjaya Retail Berhadre, has launched an entirely modernized store in Kuala Lumpur, Malaysia. Opening of such stores will not only enhance product display potential but also help increase footfall. The company has also expanded its AUVIO line of music accessories with a dozen new speakers, headphones and a wireless receiver.
On the downside, consumer buying trends continue to weigh on RadioShack. Buyers nowadays prefer purchasing online to visiting retail stores. Declining foot traffic has severely affected RadioShack’s business. Moreover, most consumers prefer tablets and smartphones, which are less profitable for the retail industry.
The core retail businesses of RadioShack, particularly, the consumer electronics platform (including digital TVs, digital music players, and digital cameras), continues its free fall. Comparable store sales for the 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.
In the third quarter of fiscal 2015, total revenue of RadioShack came in at $650.2 million, down 16.1% year over year. Quarterly gross profit was $214.2 million, down 11.2% year over year. Gross margin stood at 32.9% compared with 31.1% in the comparable year-ago quarter. The decline in gross margin is a major near-term concern for the company. This was mainly due to an unfavorable sales mix of lower-margin smartphones and other mobile devices.
RadioShack currently has a Zacks Rank #3 (Hold).
Key Picks in the Sector
Better-ranked stocks worth considering in this sector include Best Buy Co., Inc. (BBY), Autobytel Inc. (ABTL) and Geeknet, Inc. (GKNT). All the three stocks hold a Zacks Rank #2 (Buy).
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