RadioShack (RSH) was in the news Thursday with an announcement that could propel shares over the key $5 mark. I was bullish on shares back in 2012 with news of expansion in China. Today, the company is expanding to college bookstores near you.
In a partnership with the National Association of College Stores, RadioShack is bringing its products to college bookstores. The five year deal will place RadioShack centers inside 4000 stores. Items mentioned in the press release include: Beats by Dr. Dre, Skullcandy, Sol Republic, Enercell, and Auvio.
The importance of listing these brands is the two brands Enercell and Auvio. These two brands are exclusive to RadioShack and provide higher profit margins for the company. Creating brand awareness for these exclusive brands could also help boost regular RadioShack same store sales.
RadioShack's Chief Executive Officer Joe Magnacca had this to say about the deal:
"This agreement with NACSCORP lets our brand fill a specific need for college stores and for college students. This represents a unique opportunity for RadioShack to enter a non-traditional marketplace, and agreements like this are key to introducing new customers to the role that RadioShack can play in their lives."
RadioShack could use the boost in sales and new customers. In the most recently reported first fiscal quarter, the company saw same store sales drop 5.7%. Total net sales dropped from $913 million to $849 million. The company reported an adjusted net loss of $35 million. The company ended the quarter with $435 million in cash and $712 million in debt.
The company is working on refreshing and improving its brand. Remodeling and changing store designs is one development currently underway. In April, an analyst at Stifel said a new strategy could be unveiled to close stores or sell off assets to help the company going forward. Goldman Sachs didn't share the same bullish attitude, as they downgraded shares with a price target of $2.75 back in March.
Radioshack recently saw its deal with Target (TGT) come to an end. The electronics retailer previously had electronic mini-stores inside Target stores. Investors and analysts were looking for a replacement to this, and the new college bookstore deal could be the trade off that pays off for investors. I think the announcement today will be a huge boost to Radioshack going forward and could bring analysts out to upgrade the stock.
Back in June 2012, I offered a bullish take on RadioShack based on international expansion. At that time, RadioShack announced a joint venture with Cybermart to bring the RadioShack name to several new markets. The venture, 49% owned by RadioShack, will bring stores to China, Hong Kong, Macau, and Taiwan. The new deal was going to help RadioShack get to over 1000 stores in international markets. International expansion is still in the early stages for RadioShack.
The inclusion of Skullcandy (SKUL) products could be a boost to that company as well. With shares trading around $5, the company is close to the bottom of its 52 week range ($4.80-$16.75). The company, whose products are found primarily in skate and surf shops, could benefit greatly from a new audience of college students looking for the latest tech gear. Analysts expect Skullcandy's sales to decline 16% in fiscal 2013, but the company could use a strong push in college bookstores to beat that number and send shares higher.
Shares of RadioShack traded down on the news Thursday, providing an even bigger buying opportunity. In 2013, shares are up 89% as investors start to jump into the stock based on valuation. In the last year, shares are still down 11%, while shares have dropped an incredible 74% over the last two years. Analysts are still expecting net losses for the next two fiscal years. Revenue is expected to drop 12% in fiscal 2013 and 1% in fiscal 2014. A strong entry into the college bookstore space could beat these targets.
With 4700 stores in the United States and Mexico, Thursday's announcement is a big one. RadioShack will see its products available in almost double the number of stores in the United States it realized in the first quarter. The new roll-out will be complete prior to the back to school shopping season in the fall. Expect analyst upgrades and earnings beats by RadioShack later this year. With shares under $5, this is one speculative long-term stock that should be in your portfolio.