My iconic RadioShack store. Source: Metro.us
I may be dating myself, but when I was a kid, RadioShack Corporation (RSH) was the place to be. The stores were cool, innovative, and always had the latest gadgets. Fast-forward a few decades later, and you'll find an iconic company being squeezed out by the likes of Best Buy (BBY), Wal-Mart (WMT), and Amazon (AMZN); RadioShack has been on life support for some time now. For the 13 weeks ended May 3, 2014, the company reported revenue of $737 million, down over 13% from the $848 million reported in the same period a year ago; loss from operations was $334 million. The company's cash on hand was down to $62 million at the end of the quarter, due to cash burn gone unabated:
For the 13 weeks ended May 3, 2014, RadioShack suffered cash out flows from operations of $38 million. Cash out flows from investing was $10 million. The company's total cash on hand declined from $110 million to $62 million at the end of the period. Based on its current cash burn from operations of $38 million, RadioShack could potentially run out of cash over the next few quarters.
Below are the historical operating results of the company:
Moody's estimated that the company could run out of cash in the quarter ended November 1, 2015. The rub for the company was that it wanted to close 1,100 unprofitable stores to limit cash burn. However, lender agreements prohibited the number of stores RadioShack could close at once. The stock is down 75% over the past year, from $3.94 per share to $0.94. Below is the one-year stock chart for RadioShack:
Rescuer For RadioShack?
RadioShack hit a 52-week low of $0.55 per share on August 4th. It rebounded to as high as $1.60 per share on August 28th, on news of a possible cash infusion from Standard General; what gave the rumor legs was that Standard General is the same company that came to the rescue of American Apparel (APP). However, two weeks later, that cash infusion has yet to materialize. Yesterday, Wedbush Securities cut its price target to $0 per share, citing imminent bankruptcy:
RadioShack Corp. shares tumbled the most in more than two years after Wedbush Securities cut its price target for the stock to $0, saying it believed a bankruptcy reorganization was imminent. Wedbush analyst Michael Pachter, who previously expected the stock to trade at $1 within a year, said in a report that declining consumer-electronics sales and shrinking profit margins are undercutting RadioShack's comeback effort.
At mid-day, the stock was down 14% to $0.81 per share. I would advise investors to avoid the stock until management can give more visibility on cash burn and a potential cash infusion.
