RadioShack (RSH) fell 17% yesterday after reporting earnings, announcing store closures and having one analyst compare it to Circuit City.
AP B. Riley’s Scott Tilghman explains that the outcome for RadioShack looks increasingly binary:
In one way or another, RadioShack is entering a new chapter that will either have a fairytale ending as the store base rightsizing and five pillars of work help the company to recover from losses, or simply end in a bankruptcy filing as losses mount and vendors pullback. Recent results highlight the challenges facing the company as comps fell 19% on top of last year's 7% 4Q decline. [RadioShack's cost] cuts have not been able to keep up with the sales drops, and new concept stores don't seem to be profitable, yet remodels will continue. [RadioShack] is tasked with changing not just its merchandising, but also attempting to attract new traffic (demographics) in a heightened competitive environment. We expect losses to continue as negative sales trends are difficult to reverse and GM pressures persist. As a result, it is difficult to justify valuation other than at liquidation value, leading us to reiterate our Sell rating
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Shares of RadioShack have dropped 2.7% to $2.19 at 2:15 p.m., while BestBuy (BBY) has fallen 0.9% to $25.56, GameStop (GME) has gained 2.2% to $371.86 and Amazon.com (AMZN), which caused all their troubles in the first place, has risen 3.4% to $38.61.
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