RadioShack, Left For Dead, Dies
June 12, 2012 by Douglas A. McIntyre
RadioShack (NYSE: RSH), at 90 years old, operates in over 7,200 locations. Even with those advantages, the company might as well fold. The company stands as a fine example of how better-run competitors and advances in retail channels can destroy an old-line bricks-and-mortar operation.
RadioShack shares dropped to $4.15 recently, a 52-week low, down from a period high of $16.25. Often debt pushes down market value when a public corporation has thin margins as RadioShack does. That is not the case here. RadioShack’s debt load is only $675 million, and the company has $566 million in cash and cash equivalents.
RadioShack’s deteriorating value is likely to accelerate. Sales are flat, based on Q1 revenue of $1 billion. The company lost $8 million in that period, compared with a $35 million profit a year ago.
It is nearly impossible to be behind the last person in line, but RadioShack has done that. Best Buy (NYSE: BBY) is as close as RadioShack will come to finding its assassin. And, Best Buy could hardly be in more trouble itself. It was pushed to its current state by Amazon.com (NASDAQ: AMZN), which has now been blamed for the collapse of every traditional retailer from JCPenney (NYSE: JCP) to Barnes & Noble (NYSE: BKS). The hard fact for these troubled retailers is that what the market believes about Amazon is true. It has single-handedly ruined the huge portion of the retail industry that is not either mega-chain discounters like Walmart (NYSE: WMT) and Target (NYSE: TGT) or high-end operators like Tiffany (NYSE: TIF) or Coach (NYSE: COH).
As a means to illustrate what Amazon has done to the retail market, and how hopeless RadioShack’s case is, the world’s largest e-commerce company has a market cap of $100 billion, which is more than Macy’s (NYSE: M), JCPenney, Nordstrom (NYSE: JWN), Gap (NYSE: GPS), Abercrombie & Fitch (NYSE: ANF), Costco (NASDAQ: COST), Dillard’s (NYSE: DDS), Barnes & Noble and Sears Holdings (NASDAQ: SHLD) combined.
RadioShack’s market cap is $400 million.
Douglas A. McIntyre
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