Finding bargains in retail stock is no easy task, even at discounters on the low end of the spectrum such as Dollar General and Family Dollar, both trading at more than $50 per share. This is why it is surprising to find a familiar name at $3.27 a share, such as is Radio Shack’s case (RSH).
Radio Shack has seen better days. Evolving technology has hit it hard, as well as a struggling economy and the changing landscape of retail. Simple throwaway technology has replaced electronics of a DIY nature. Radio Shack has not yet found where it fits into the economy as it changes.
These days, people are looking for bulk stores such as Costco and one-stop shops such as Walmart. Rather than shopping around for your TV set, you can select one from Sam’s Club as you are doing your grocery shopping, or surf the sales over the web. Those in search of an involved experience turn to the Apple Store to utilize their friendly salespeople and selection of gadgets.
Value Stock or Dinosaur?
Will Radio Shack turn things around? It’s starting to look like they may be doomed, as the company’s quarterly revenue growth from one year to the next was zero. Investors in the company diluted share earnings at a ratio of 1-1.39 and the company lost $43 million in this past fiscal year.
This means that investors have an anticipated asset return of -.87% and equity return around -20.62%. This is the classic example of a retailer slowly dying out, barely getting by over the years, kept above the water by cash flow from loyal customers. This is the same thing that happened to Kmart, despite Target and Walmart competition. Customer loyalty keeps them going, as does their lack of attempt to be cool or hip. When James F Gooch left his CEO position in September, he wasn’t even replaced by the board.
Co executive at Walgreens, Joseph Magnacca, has now taken Gooch’s position. Walgreens is not considered the swiftest retailer in the market, but appears to have held its own, at least considering the drug business.
Most likely, Radio Shack shelves will now be stocked with cheaper products in attempt to generate additional revenue and appeal to urban shoppers on the lower end. For awhile longer, Radio Shack will probably stick around, but they are not a sound investment decision. The chain will, in all probability, maintain its low stock price until it dies out. While it may survive, it certainly is no goldmine.
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