Tuesday, December 25, 2012

Radio Shack?

How does this place stay in business?

In a previous posting, I opined that Radio Shack might be gone in 2011, as many prognosticators had suggested.  It was a Zombie company, the living dead, just waiting for that final shotgun blast to the head.

But here it is, almost 2013 and the company still is in business.

But for how long?

Date Qtr EPS

Revs




10/23/12 Q312 -$0.33

$1B




7/25/12 Q212 -$0.21

$953.2M




4/24/12 Q112 -$0.08

$1.01B




2/21/12 Q411 $0.12

$1.39B




10/25/11 Q311 $0.15

$1.03B




7/26/11 Q211 $0.31

$941.9M




4/25/11 Q111 $0.33

$1.06B




2/22/11 Q410 $0.51

$1.37B




Note that "revenues" are not profits but merely gross income.  Net profit per share at Radio Shack is negative, which means they are losing money.


The earnings trend does not look good.  But oddly enough, their revenues are relatively flat, if not trending upward slightly.   What is really crazy is that even as the company is losing money, it is still paying dividends!


Ex/Eff DateTypeCash AmountDeclaration DateRecord DatePayment Date
5/30/2012 Cash0.125 5/17/2012 6/1/2012 6/22/2012
3/14/2012 Cash0.125 2/16/2012 3/16/2012 3/30/2012
11/22/2011 Cash0.5 10/25/2011 11/25/2011 12/15/2011
11/23/2010 Cash0.25 11/8/2010 11/26/2010 12/16/2010
11/24/2009 Cash0.25 11/9/2009 11/27/2009 12/16/2009
11/25/2008 Cash0.25 11/6/2008 11/28/2008 12/17/2008
11/27/2007 Cash0.25 11/12/2007 11/29/2007 12/19/2007
11/29/2006 Cash0.25 11/6/2006 12/1/2006 12/20/2006
11/29/2005 Cash0.25 9/30/2005 12/1/2005 12/19/2005



What is up with that?   As I discussed before with regard to dividend stocks, dividends are great, provided the company is making money to pay for them.  When a company pays dividends while losing money, the end result is that the company is eating itself.  

And the market seems to be recognizing this, as the share price has dropped below $2 - down from as much as $11 in the last year (you have to feel sorry for those who paid that much for the stock!).

What is going on here?  Is the company merely failing, or is it being driven into the ground (Bain-style)?  After all, if revenues are flat, why are profits (earnings) dropping?   Part of the problem might be debt load, part might be tighter margins on newer cell phone products.   Part might be poor management and poor cost controls.  Or is Amazon taking down another brick-and-mortar store?  Or could it be all of the above?

As this article noted, the company's debt rating is in the tank.  With about $700 Million in debt, until recently, the company had a pretty hefty load (although according to some sources, the company had, at least until recently, about $500 Million in cash and cash equivalents).

It is hard to know what is going on at Radio Shack, which is a good reason not to bet on it.  As I noted in a previous posting about Sears, it can take a long time for a company to finally sputter and die.  No company can continue indefinitely with negative earnings.   And I for one am not convinced that the company has the cache in the market to attract customers anymore.  There is no value in the Trademarks and underlying good will.   To my mind, Radio Shack used to mean a place you went to buy resistors and solder - until it morphed into a place to buy cheap radio-controlled cars.

2013 will be an interesting year for a lot of companies like Radio Shack, Sears, J.C. Penny, Martha Stewart, and others - companies that have been hemorrhaging cash and whose business models are outdated or out of style.



2 comments:

  1. UPDATE 2014: Radio Shack is a Zombie, and it takes a long time for Zombies to crash and burn. But each year, they lose more money, they have less cash, they close more stores, they make less sales, they have fewer customers. I seriously doubt they can turn this around at this point. See:

    http://money.cnn.com/2014/06/10/investing/radioshack-earnings-close-stores/index.html?hpt=hp_t3

    Yet there are still some out there who believe it!

    ReplyDelete
  2. Zombies can eat their own flesh for years. But 2015 might be the year Radio Shack finally topples. The company is valued at $50 million, which means a lottery winner could buy the while thing. The stock has been de-listed from the NYSE and they have defaulted on their creditors.

    http://money.cnn.com/2015/02/02/news/companies/radioshack-trading-suspended/index.html

    ReplyDelete

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