Why RadioShack Stock Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of RadioShack were getting pummeled once again today, falling as much as 25% after the electronics retailer posted yet another dismal earnings report.

So what: The Shack missed earnings estimates by $0.76, reporting a loss of $1.11 a share on expectations of a $0.35 loss as sales tumbled 10.4% to $805 million. Same-store sales similarly fell 8.4% due to lower sales in all the company's product categories. RadioShack also confirmed that it would be receiving $835 million in financing repayable over the next five years from a group of lenders. Despite the rough quarter, new CEO Joseph Magnacca noted that the company "is moving forward quickly with its turnaround efforts," which included rolling out more than 100 concept and brand statement stores.


Now what: In an age of big-box stores and online retail, RadioShack appears to be getting squeezed in the middle, and a comparable sales drop of 8% is certainly ugly. Magnacca tried to put to rest any doubts about the retailer's solvency, saying it had $613 million in liquidity, and there is still hope for the electronics retailer. Just as Best Buy's shares experienced a turnaround on a number of new initiatives, including in-store Samsung kiosks, there is an opportunity for RadioShack to do the same by homing in on its growth products such as prepaid phones, speakers, and Apple accessories as well as its new concept stores. Time will tell if the strategy will pay off, but until then, the stock will remain an extremely high-risk play. 

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The article Why RadioShack Stock Plummeted originally appeared on Fool.com.

Fool contributor Jeremy Bowman owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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