) lost more than 10% on Tuesday after the electronics retailer
posted its ninth successive quarterly loss. The company's net loss
in the first-quarter widened to $98.3 million compared with a net
loss of $23.3 million in the year-ago quarter. These results are
reflective not only of the individual challenges faced by
RadioShack but also of the electronics retail industry as a whole.
Larger Stores Pose a Challenge
Some of RadioShack's problems are company specific. For instance,
it is finding it difficult to compete with larger retailers in the
electronic retailer segment, such as
). It has also lost its core customer base of electronics
enthusiasts and now sells products which are available at most
But most of the company's problems extend to the entire sector.
With their wide range of products, often available at lower price
points, large format retailers like
Wal-Mart Stores Inc.
) are a serious threat to the stand-alone electronic retail
Customers Go Online
According to data released by Kantar Retail, 25% of electronics,
office equipment, computer products and appliances were purchased
online by customers last year. Internet behemoths like
) now pose a serious challenge when it comes to popular brands.
On the other hand, electronics enthusiasts, who were loyal
customers of RadioShack, have now turned to websites like
Kickstarter. The crowdfunding platform is one of the several
options available online for innovation-focused customers.
Wireless Carriers Offer Exclusive Plans
RadioShack's CEO Joseph Magnacca said consumers have not been
enthusiastic about new models of phones recently and this factor
had acted as a drain on revenues. Market watchers also believe
demand for electronics is falling because of the lack of innovative
offerings. The paucity of new product launches is the more obvious
reason for this phenomenon.
Additionally, wireless carriers are offering plans that allow
subscribers to purchase phones through installments without paying
anything upfront. These plans are available only at operators'
stores. For instance,
) has 2,000 stores which offer such plans. Of course, this factor
could be less of a problem once other stores like RadioShack can
also offer them.
In such a challenging environment, we believe that other stocks
offer better investment options. The first of these is an Internet
retailer and the second is a wireless operator. The third is an
electronics retailer, albeit a larger one than RadioShack. Below we
present three stocks which possess the potential to grow in such an
environment, each of which also has a good Zacks Rank.
) is one of the largest online retailers in the world. The
company's first quarter earnings were ahead of the Zacks Consensus
Estimate, and management provided encouraging second quarter
Turnaround in the marketplaces segment, a focus on buying
experience, a strong payments segment, opportunities in the
fast-growing mobile space, international expansion and a strong
balance sheet remain positives.
eBay holds a Zacks Rank #3 (Hold) and has expected earnings growth
of 9.90%. The forward price-to-earnings ratio (P/E) for the current
financial year (F1) is 19.21.
is the second largest provider of wireless services in North
America and one of the world's leading communications service
carriers. Through its subsidiaries and affiliates, AT&T offers
a wide range of communication and business solutions. The company
provides wireless, local exchange, long-distance, data/broadband
and Internet, video, managed networking, wholesale and cloud-based
The company is likely to witness strong momentum in both wireline
and wireless businesses. Continued strength in the smartphone
business and solid branded computing device sales are driving the
Currently the company holds a Zacks Rank #3 (Hold) and has expected
earnings growth of 5.70%. It has a P/E (F1) of 13.22.
Best Buy Co., Inc.
) is a multinational specialty retailer of consumer electronics,
home office products, entertainment software, appliances and
related services with 1,495 domestic locations and 473
The company posted fourth-quarter fiscal 2014 adjusted earnings of
$1.24 per share that surpassed the Zacks Consensus Estimate of
$1.01 but was lower than $1.47 earned in the year-ago quarter. The
performance was aided by effective cost containment. Best Buy has
now raised its target of cost reduction to $1 billion.
Apart from a Zacks Rank #3 (Hold), Best Buy has expected earnings
growth of 11.10% for the next financial year. It has a P/E (F1) of
All of these companies possess unique strengths required to combat
a challenging business environment. This is why these stocks would
make good additions to your portfolio.
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