Is RadioShack Corporation (RSH)’s Newest Turnaround Working?

RadioShack (RSH)Like so many retailers over the past few years, RadioShack Corporation (NYSE:RSH) has been hit hard by a combination of price-crushing wholesalers and technological disruptors. The shift has left the company in near pieces, with hardly a bull to be found between the cracks. In its most recent earnings release, RadioShack showed a wider-than-expected loss and a continued drop in same-store sales. Yet the market seemed unperturbed by its loss, or perhaps just unsurprised, as the stock actually ticked up slightly upon the release. Is there a silver lining to RadioShack Corporation (NYSE:RSH)’s business, or has this once-great electronics retailer finally flatlined?

Crash cart!
At this point in its life cycle, the Shack has been through the gamut of corporate turnaround maneuvers — CEO merry-go-round, store renovation, cost-cutting, and more. But so far, nothing seems to have plugged the hole in the bottom of the business model. For this past quarter, the company brought in $849 million, more than $100 million short of the consensus $964 million. On the comparables front, same-store sales were down 5.7%, compared with a 4.2% drop in the year-ago quarter. The bottom-line loss came in at $0.35 per share, while the Street was expecting a loss of around $0.11 per share.

By nearly all of the financial metrics, RadioShack Corporation (NYSE:RSH) had one dismal quarter. But, to give credit where it’s due, the company is making another valiant attempt at turning around. This past quarter could be viewed as a pivot point from the Old New RadioShack to the New New RadioShack Corporation (NYSE:RSH). At the helm of this Bismarckian chain is Joe Magnacca. In a previous article, I posited that Magnacca may be the company’s best chance at a revival. He was responsible for the extremely successful turnaround of New York drugstore chain Duane Reade (acquired by Walgreen Company (NYSE:WAG)) and has made some interesting comments regarding RadioShack’s (few) bright spots. For one thing, Magnacca sees opportunity in that RadioShack is a niche, small-format retailer with a very significant commercial real estate presence. In this quarter’s conference call, the CEO elaborated on the plan to return to profitability, which includes a new line of private-label goods and an increased product mix of DIY items.

The plan is ambitious but sound. Given the very short length of time that Magnacca has been in the C-suite at RadioShack Corporation (NYSE:RSH), we can’t tell yet if the project is working. Capital expenditures did go up for the quarter, so there is certainly motion behind closed doors, but it may not be until the back half of this year that we see any evidence of an improving situation.

In the meantime
RadioShack Corporation (NYSE:RSH)’s shares are cheap — for a great reason. It’s far too early to tell if the plan will stick. Part of the new chief’s goal is to reintroduce young shoppers to the stores. In my opinion, this is an impossible task given the myriad of options, not to mention preferences, that young electronics shoppers have.

A turnaround is possible, but it’s a long shot. Put this stock on the back burner, and check in around the third quarter. At this point, though, I recommend looking elsewhere for a retail investment.

The article RadioShack’s Latest Turnaround: Is It Working? originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool owns shares of RadioShack.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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