), the beleaguered electronic and mobile products retailer, faces
further trouble. On Jun 20, 2014, the company suffered a major blow
as its stock price fell below $1 (and closed at 92 cents) on NYSE.
This happened for the first time in the company's history.
The $1 price tag generally acts as a psychological barrier for
any stock. The NYSE has the right to delist a stock if it closes
below $1 a share for 30 consecutive trading sessions. Although the
stock can still trade in the over-the counter (OTC) market, several
industry experts believe that RadioShack is likely to face Chapter
11 Bankruptcy proceeding.
RadioShack's coreconsumer electronics (including digital TVs,
digital music players, and digital cameras) retail business is on
secular downtrend and is unlikely to recover in the near future.
Further, the customers are increasingly opting for online purchase
instead of visiting brick-and-mortar retail stores.
Loss of foot traffic is taking a toll on RadioShack's mobility
business, on which the company was banking for its future growth.
Moreover, majority of consumer's are switching to low-margin
tablets and smartphones from high-margin computers and
RadioShack has undertaken several strategic moves to make a
turnaround. Management is focusing on reducing costs, which
includes closing up to 200 stores every year over the next three
years, lowering rent expense through negotiations with landlords,
reducing compensation expense by optimizing labor hours and store
operating hours, and reviewing other expenses for cost-reduction
Unfortunately, none of these methods has produced any effective
results. At present, major concerns for the company are its
decreasing liquidity, widening losses and disagreements with its
lenders over the store closure plan.
Recently reported first quarter of fiscal 2015, RadioShack's
revenues declined 13%, gross profit dropped 21% and adjusted
operating loss soared by a whopping 700% from the prior-year
quarter. At the end of the quarter, the company had just $62
million of cash and $1.2 billion of debt and short-term
Moreover, comparable store sales for the company-operated stores
and kiosks (stores and kiosks that have been operational for at
least a year) were down 14% in the last reported quarter. This is a
key retail performance indicator measuring growth from the existing
sales locations. The stock price, which had plummeted 79% in the
last year, witnessed a decline of nearly 40% in the last 10
Furthermore, RadioShack is facing intense competition from
larger rivals like
Best Buy Co. Inc.
Wal-Mart Stores Inc.
). Best Buy is gradually rolling out small mobile stores. Best Buy
plans to open 600 to 800 stores within five years, which in turn,
will negatively impact RadioShack's market share. RadioShack is
also facing stiff competition from online retailer,
). RadioShack currently carries a Zacks Rank #4 (Sell).
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