RadioShack Beefs It

Mar. 4.14 | About: RadioShack Corporation (RSH)

The million dollar question is whether or not RadioShack (NYSE:RSH) has the goods to turn around their business. Investors thought they got off to a good start with their Super Bowl commercial - which a la Domino's Pizza (NYSE:DPZ) - poked fun at itself, claiming that the 1980's are over. It was the sole bright spot for a company who has been struggling for the past couple of years.

The stock picked up the next trading day, but that was just due to the commercial. The question remains whether or not there is long-term potential for RadioShack, both as a business and as an investment. RSH, although down about 10% in the last 12 months, had somewhat bucked the trend for 2014 - so far posting gains of about 5% for the year.

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In numerous articles, I've taken a stance to be short on RadioShack since early 2013. In an article I wrote about a year ago, I penned:

Before Tiger Direct, Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and other online electronic shops, RadioShack was the go to spot for electronics and accessories in the midst of the computer boom. Not only was it a place to go and keep up to date on the latest accessories and electronics to come out, it is a place where there always used to be a banter in the air amongst interested parties exchanging tips of the trade. It seemed like a bit more than a just store, it was like a daily meeting of your local electronics gurus.

Now, the RadioShack retail stores stink with an air of desperation. They're usually empty, there's little focus on electronics aside from mobile phones, and the sales pitch from the commission fueled associate trying to pitch either the product replacement warranty or the bargain du jour lasts far longer than the actual shopping experience itself. Stores are closing, and business is waning - it looks like the writing is on the wall for the beginning of an unceremonious exit for the company.

So, of course, I was interested in whether or not RadioShack was going to post the numbers to back up this new ad campaign of revamping the company.

And the answer to that is: not yet.

RadioShack reported dismal earnings this morning before the market opened, claiming it wants to close up to 1,100 of its stores and posting abysmal Q4 numbers. Previous numbers has suggested that the chain was going to close about 500 of its 5,000+ stores. The company posted adjusted net EPS of -$1.29 on $935.4 million in top line revenue. Those numbers were compared to an EPS of $0.07 and revenues of $1.12 billion a year prior.

RadioShack's CEO, Joe Magnacca, commented that the results were catalyzed by poor holiday sales, advertising and promotional costs, and a very soft "mobility marketplace". You know those 17 year old kids that really want to sell you a cell phone when you step into the store? They're not pulling their weight.

He continued:

Over the past few months, we have undertaken a comprehensive review of our portfolio from many angles - location, area demographics, lease life and financial performance - in order to consolidate our store base into fewer locations while maintaining a strong presence in each market. The result of that review is our plan to close up to 1,100 underperforming stores. We will continue to have a strong, unmatched presence across the U.S. with over 4,000 stores including over 900 dealer franchise locations.

Magnacca also claims that the company's turnaround continues to make progress, despite the poor numbers. The company failed to offer guidance for the upcoming year.

I remain firmly bearish on the company, until the numbers can start to catch up with the "rebranding and rebuilding" sentiment that the company wants to go after.

The market seems to not be buying Magnacca's line, either. Shares were off 25% in pre-market trading on Tuesday.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.