RadioShack’s Losses Mount In Q1 - Twice

RadioShack’s Losses Mount In Q1

Fort Worth, Texas — RadioShack reported a net loss of $98.3 million in its first quarter amid what it described as a soft market for CE and lackluster mobile demand.
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Fort Worth, Texas — RadioShack reported a net loss of $98.3 million in its first quarter amid what it described as a soft market for CE and lackluster mobile demand.

The loss, covering the 13 weeks ended May 3, laps a year-ago net loss of $28 million.

Net sales sank 13 percent to $736.7 million, and comp sales fell 14 percent as traffic declined and mobile business weakened.

Gross profit slipped from 40.2 percent to 36.5 percent of net sales, due mainly to “aggressive price competition” in pre- and post-paid handsets, the retailer said.

“Overall, our first quarter performance was challenged by an industrywide decline in consumer electronics and a soft mobility market which impacted traffic trends throughout the quarter,” reported CEO Joe Magnacca.

“In particular, our mobility business was weak due to lackluster consumer interest in the current handset assortment and increased promotional activities across the industry including the wireless carriers. This resulted in disappointing sales and gross margin performance.”

Despite the dour results, Magnacca continues to plug away at his turnaround plan for the iconic CE chain, which includes a chain-wide store remodel based on its successful concept showrooms; a new “Do It Together” marketing campaign; and, most recently, a partnership with PCH International to create a fast-track pipeline for new products.

At the same time, the company has cut costs, is lowering its corporate headcount and is reducing discretionary expenses, Magnacca said.

RadioShack has also closed 22 stores this year and expects to shut as many as 200 more, in lieu of plans to close over a thousand underperforming and overlapping locations that were blocked by lenders.

In a research note, Janney Capital Markets retail analyst David Strasser observed that while the chain “continues to make strides with its new concept stores, which are seeing sales growth … they make up such a small part of the overall store base that they do not really move the needle.”

In addition, a loss of $38 million in cash flow from operations, and the cash drain from the new initiatives further raises liquidity concerns, Strasser said.

“While the total debt of $614.5 million does not mature until 2018-2019, we know vendors are watching the balance sheet carefully,” he noted.

RadioShack’s shares fell 12 percent in pre-market trading to $1.54 following its first-quarter announcement.

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