RadioShack Crushed in 1Q - Analyst Blog

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The nightmare for RadioShack Corp. ( RSH ) persists as the company continues with its disappointing performance. The company's first-quarter 2012 financial results were well below the Zacks Consensus Estimates.

The comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) decreased 4.2% year over year. This is a key retail performance indicator measuring growth from existing sales locations.

GAAP net loss from continuing operation, in the first quarter of 2012, was $8 million or a loss of 8 cents per share compared with a net income of $31.4 million or 30 cents per share in the year-ago quarter. Quarterly EPS of a loss of 8 cents was nowhere near the Zacks Consensus Estimate of an income of 5 cents.

Quarterly net revenue was $1,008.3 million, down 0.9% year over year, missing the Zacks Consensus Estimate of $1,065 million. The year-over-year decrease in revenue is primarily attributable to a significant decline in sales from the U.S. RadioShack company-operated stores.

Quarterly gross profit was $394.5 million compared with $454.4 million in the prior-year quarter. Gross margin was 39.1% in the reported quarter compared with 44.7% in the prior-year quarter. This was mainly due to unfavorable sales mix toward lower margin smartphones and other mobile devices coupled with higher percentage of mobility sales due to expansion of kiosks within Target Corp. ( TGT ) stores.

Quarterly Selling, General, and Administrative expenses were $373.3 million compared with $370.6 million in the year-ago quarter. Operating income in the first quarter of 2012 was a mere $1.8 million compared with $65.1 million in the year-ago quarter.

During the first quarter of 2012, RadioShack generated $48.5 million of cash from operations compared with $60.8 million in the year-ago quarter. Free cash flow (cash flow from operations less capital expenditures) in the reported quarter was $37.3 million compared with $46.3 million in the prior-year quarter.

At the end of the first quarter of 2012, RadioShack had $566.4 million of cash & cash equivalents, compared with $591.7 million at the end of 2011. Total debt, at the end of the previous quarter, was $674.9 million compared with $670.6 million at the end of 2011. At the end of the first quarter of 2012, debt-to-capitalization ratio was 0.48 compared with 0.47 at the end of 2011.

Segment Results

U.S. RadioShack Company-operated store segment, which is the prime contributor of total revenue, was down 6.9% year over year to $833.6 million.

Within this segment, Mobility sales were down 5.2%, primarily due to lower postpaid wireless sales from Sprint Nextel Corp. ( S ). Signature revenue was up 0.7% due to higher sales of tablet accessories, headphones, wireless accessories and service agreements. Consumer Electronics sales were down 24.1% mainly due to lower sales of digital TVs, digital music players, and digital cameras.

Other segment revenue increased 43% year over year to $174.7 million. The increase was primarily driven by a kiosk roll out in Target Stores.

Recommendation

RadioShack currently enjoys a long-term Neutral recommendation. Additionally, we have a short-term Zacks #3 Rank (Hold) on the stock.


 
RADIOSHACK CORP ( RSH ): Free Stock Analysis Report
 
SPRINT NEXTEL ( S ): Free Stock Analysis Report
 
TARGET CORP ( TGT ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: RSH , S , TGT

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