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RadioShack Corporation (RSH), Best Buy Co., Inc. (BBY): Who’s Screaming for Help?

In this online era, the brick and mortar specialist retailers are screaming for help in a major way. The online retailers have the brick and mortar retailers searching for new strategies to keep up with the online shopping frenzy. Some of the retailers waited a little too long before trying to make adjustments, which is costing them now. RadioShack Corporation (NYSE:RSH) is one of those retailers who is screaming for help and is certainly looking for it. RadioShack’s market cap is still dwindling away, dropping from $300 million to $273.2 million, a $26.8 million drop in just one quarter.

RadioShack Corporation (NYSE:RSH)

As I’m writing this article I received an advertising e-mail from RadioShack Corporation (NYSE:RSH) stating, “Big savings, No contract, Win-win.”

RadioShack Corporation (NYSE:RSH) has been on a streak of missing the Street’s estimates for a few years.

“We expect the turnaround to continue for the next several quarters, but a streamlined assortment of products — with more emphasis on categories like digital fitness and accessories like headphones and speakers — should be available in stores by the critical holiday season, during which retailers can make up to 40 percent of all revenue,” Chief Executive Joe Magnacca said in a call with analysts.

RadioShack Corporation (NYSE:RSH) missed analyst’s estimates in the first quarter. (For more information, see “Is This Retailer Finished?”) The second quarter seemed to be a little different.

For the first time in a few years, its revenue beat analyst’s estimates. RadioShack Corporation (NYSE:RSH) reported an increase in revenues up $844.5 million, versus analyst’s estimates of $816.1 million.
Most of RadioShack Corporation (NYSE:RSH)’s revenue gains were driven by promotions and markdowns in an attempt to rid its stores of merchandise and drive traffic into its stores.

The third quarter’s average analyst’s estimate for revenue is $881.0 million and the average EPS analyst’s estimate is -$0.25. I strongly believe RadioShack will continue the trend of missing analyst’s estimates as we go forward. This is where the good news ends and the bad news begins.

Net loss for the second quarter totaled -$53.1 million, or $0.53 per share compared to a net loss of -$21 million, or $0.21 per share in the same period in 2012. The loss is two times more than what analysts expected of $0.24 per share.

“The quarter was designed to clear out unproductive inventory and test markdowns and discounts to help improve promotions going forward,” Chief Executive Magnacca said in the same call with analysts.

The second quarter ended with $713 million in total debt and $1.6 billion in total current assets. The debt rose up by $1 million from $712 million in the first quarter, and total current assets fell $100,000 from $1.7 billion in the first quarter. RadioShack’s cash on hand fell to $432 million compared to $435 million at the end of March, a 7% drop in just three months.

RadioShack always misses the street’s expectations, but its rival Best Buy Co., Inc. (NYSE:BBY) also fell short of the street’s expectations and may do it again.

“As we look forward to the second quarter, while not providing financial guidance, we believe that the ongoing investment in price competitiveness that contributed to our gross profit and EPS declines in the first quarter will continue into the second quarter,” Chief Financial Officer Sharon McCollam said in a statement on May 21.

Let’s view Best Buy Co., Inc. (NYSE:BBY)’s first-quarter results because the second-quarter is yet to be reported.

Best Buy Co., Inc. (NYSE:BBY) reported that revenues fell 10% to $9.4 billion from $10.4 billion last quarter, missing the street’s estimate of $10.7 billion. Its explanation for the miss is the loss of revenue from 49 large format stores that were closed in 2012, the shift of the Super Bowl into 2012’s fourth-quarter, and the loss of revenue from 15 large format stores that were closed last year in Canada.

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