Radio Shack?

How does this place stay in business?

In a previous posting, I opined that Radio Shack might be gone in 2011, as many prognosticators had suggested.  It was a Zombie company, the living dead, just waiting for that final shotgun blast to the head.

But here it is, almost 2013 and the company still is in business.

But for how long?

Date		Qtr	EPS			Revs
10/23/12		Q312	-$0.33			$1B
7/25/12		Q212	-$0.21			$953.2M
4/24/12		Q112	-$0.08			$1.01B
2/21/12		Q411	$0.12			$1.39B
10/25/11		Q311	$0.15			$1.03B
7/26/11		Q211	$0.31			$941.9M
4/25/11		Q111	$0.33			$1.06B
2/22/11		Q410	$0.51			$1.37B

Note that "revenues" are not profits but merely gross income.  Net profit per share at Radio Shack is negative, which means they are losing money.


The earnings trend does not look good.  But oddly enough, their revenues are relatively flat, if not trending upward slightly.   What is really crazy is that even as the company is losing money, it is still paying dividends!

Ex/Eff Date	Type	Cash Amount	Declaration Date	Record Date	Payment Date
5/30/2012	Cash	0.125	5/17/2012	6/1/2012	6/22/2012
3/14/2012	Cash	0.125	2/16/2012	3/16/2012	3/30/2012
11/22/2011	Cash	0.5	10/25/2011	11/25/2011	12/15/2011
11/23/2010	Cash	0.25	11/8/2010	11/26/2010	12/16/2010
11/24/2009	Cash	0.25	11/9/2009	11/27/2009	12/16/2009
11/25/2008	Cash	0.25	11/6/2008	11/28/2008	12/17/2008
11/27/2007	Cash	0.25	11/12/2007	11/29/2007	12/19/2007
11/29/2006	Cash	0.25	11/6/2006	12/1/2006	12/20/2006
11/29/2005	Cash	0.25	9/30/2005	12/1/2005	12/19/2005

What is up with that?   As I discussed before with regard to dividend stocks, dividends are great, provided the company is making money to pay for them.  When a company pays dividends while losing money, the end result is that the company is eating itself.  

And the market seems to be recognizing this, as the share price has dropped below $2 - down from as much as $11 in the last year (you have to feel sorry for those who paid that much for the stock!).

What is going on here?  Is the company merely failing, or is it being driven into the ground (Bain-style)?  After all, if revenues are flat, why are profits (earnings) dropping?   Part of the problem might be debt load, part might be tighter margins on newer cell phone products.   Part might be poor management and poor cost controls.  Or is Amazon taking down another brick-and-mortar store?  Or could it be all of the above?

As this article noted, the company's debt rating is in the tank.  With about $700 Million in debt, until recently, the company had a pretty hefty load (although according to some sources, the company had, at least until recently, about $500 Million in cash and cash equivalents).

It is hard to know what is going on at Radio Shack, which is a good reason not to bet on it.  As I noted in a previous posting about Sears, it can take a long time for a company to finally sputter and die.  No company can continue indefinitely with negative earnings.   And I for one am not convinced that the company has the cache in the market to attract customers anymore.  There is no value in the Trademarks and underlying good will.   To my mind, Radio Shack used to mean a place you went to buy resistors and solder - until it morphed into a place to buy cheap radio-controlled cars.

2013 will be an interesting year for a lot of companies like Radio Shack, Sears, J.C. Penny, Martha Stewart, and others - companies that have been hemorrhaging cash and whose business models are outdated or out of style.