The nightmare of
) persists as the company continues with its disappointing
performance. Second-quarter 2012 financial results were well below
the Zacks Consensus Estimates.
Management has suspended its dividend in order to reduce its
debt burden. Adverse product-mix toward low-margin devices and a
volatile macro-economic scenario in the U.S. are taking a toll on
the company's financials. RadioShack's core consumer electronics
retail business is on a secular downtrend and is unlikely to be
revived in the near future.
Consumers increasingly prefer online purchasing to visiting
retail stores. Loss of foot traffic has severe negative impact on
RadioShack's business. Most of the consumers prefer tablets and
smartphones, which are less profitable for the retail industry. We
do not find any immediate growth catalyst and therefore downgrade
our recommendation on RadioShack to Underperform.
RadioShack is facing bottom-line pressure for its lucrative
wireless platform. In the previous quarter, the company suffered a
net loss of $21 million.
Moreover, the company delivered a weak bottom line due to costs
associated with transition from an adverse product mix toward
low-margin smartphones, T-Mobile to Verizon Wireless partnership,
and underperformance of its businesses with
Sprint Nextel Corp.
Although management remains confident in achieving future
business from Verizon Wireless, it believes that Verizon business
needs more consumer awareness and spend increasing amount for
marketing. Verizon is a joint venture between
Verizon Communications Inc.
Vodafone Group plc.
We expect the wireless division revenue to remain almost the
same in 2012. RadioShack also forecasted its net income to decline
further in 2012.
RADIOSHACK CORP (RSH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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