We upgraded our recommendation on
) to Neutral. The company reported mixed financial results for
the second quarter of 2013. While total revenue surpassed the
Zacks Consensus Estimate, net earnings fell below the same.
Why the Upgrade?
RadioShack has adopted 5 strategies to restructure its
business model. These are: (1) repositioning the brand (2)
revamping product assortment (3) reinvigorating stores (4)
achieving operational efficiency and (5) attaining financial
flexibility. The company is taking the service of business
advisory firm, AlixPartners and investment bank Peter J. Solomon
Co. to make a turnaround. Management has decided to close all
underperforming stores once their lease period expires.
In the second quarter of 2013, the comparable store sales for
the company-operated stores and kiosks (stores and kiosks that
have been operational for at least a year) were up 1.3% year over
year. This is a key retail performance indicator measuring growth
from the existing sales locations.
Moreover, revenues of the high-margin Signature business grew
6.4% year over year. This was the sixth consecutive quarter of
positive sales growth in this platform. Signature sales increased
primarily due to higher sales of wireless accessories.
The company is striving to gain more importance as a strategic
partner for nationwide wireless operators like
Verizon Communications Inc.
RadioShack has formed a partnership with Beats By Dre,
installed new display areas within the store dedicated to
wearable digital fitness technology, established a new do-it
yourself product line in partnership with Maker Media, and signed
a five-year agreement with NACSCORP to offer consumer electronics
and accessories to nearly 4,000 college stores.
Recently, this Zacks Rank #3 (Hold) company expanded its AUVIO
line of music accessories with a dozen new speakers, headphones
and a wireless receiver.
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