RadioShack Q1 Loss Wider than Ests - Analyst Blog

RadioShack Corp. RSH posted dismal quarterly numbers for the first quarter of fiscal 2015 with both the top and the bottom line missing the respective Zacks Consensus Estimate.

GAAP net loss from continuing operations in first-quarter 2015 was $98.3 million or a loss of 97 cents per share compared with a net loss of $23.3 million or a loss of 23 cents per share in the year-ago quarter. Also, adjusted loss per share of 98 cents was significantly wider than the Zacks Consensus Estimate of a loss of 54 cents. Total revenue was $736.7 million, down 15.2% year over year and also short of the Zacks Consensus Estimate of $761 million.

Notably, comparable store sales for company-operated stores and kiosks (stores and kiosks that have been operational for at least a year) were down 14% in the reported quarter. This is a key retail performance indicator measuring growth from the existing sales locations.

Quarterly gross profit was $268.7 million versus $340.9 million in the prior-year quarter. Gross margin was 36.5% compared with 40.2% in the comparable year-ago quarter. Selling, general and administrative expenses were $335.9 million against $333.7 million in the previous-year quarter. Operating loss was $81 million compared with an operating loss of $10.3 million in the year-ago quarter.

RadioShack consumed $37.8 million in the reported quarter against earnings of $76.9 million in the prior-year period.  At the end of the reported quarter, RadioShack had $61.8 million in cash & cash equivalent compared with $402.6 million at the end of April 30, 2013. Total debt, at the end of the reported quarter, was $613.4 million versus $613 million at the end of the previous quarter. The debt-to-capitalization ratio was 0.89 compared with 0.78 at the end of Feb 1, 2014.

Our Take

RadioShack is facing intense competition from larger rivals like Best Buy Co. Inc. BBY and Wal-Mart Stores Inc. WMT. Best Buy is gradually rolling out small mobile stores and plans to open 600 to 800 stores within the next 5 years. This, in turn, will negatively impact RadioShack's market share. RadioShack is also facing stiff competition from leading online retailer, Amazon.com Inc. AMZN.

RadioShack currently carries a Zacks Rank #5 (Strong Sell).