RadioShack has been plagued with challenges throughout recent years. It suffered from decreased product demand, rising online competition, failed turnaround strategies and turnover at the top of the ladder.
The company is currently under the leadership of its fourth CEO in three years. Joe Magnacca has plans to cut inventories and secure new liquidity to help turn the suffering company around. Investors are hoping for a miraculous rejuvenation like Best Buy experienced. Radio Shack shares are up 84% this year and have been trading near resistance. So has the stock become a buy, sell or hold?
Analysts point out that Best Buy is evidence that dramatic turnarounds do happen. Its stock has improved 220% this year. RadioShack has had a healthy return this year, which has been a pleasant surprise. Despite the improvement, the company’s shares are down 58% from their levels in January 2012. Stock Traders Daily said the stock is at long-term resistance, so despite its improving levels there are still some things to consider. In efforts to raise cash, Radio Shack is reducing stocked items. Stock for the company is trading around $4 and the balance sheets shows $4.33 in cash per share. The main concern is the debt is currently at $7.20 per share.
The current CEO has brought in a new investment officer and investment banker in what many people say is a move to do some refinancing and raise some liquidity. Reports indicate that Radio Shack leases the majority of its retail property, which means it owns very little real estate. The company does not have much security to use as collateral with potential lenders. Rumors that have been published in media accounts indicate that the company hopes to have a financing deal secured by October. The stock has been moving on the speculation of potentially refinancing its debt.
Back in 2008, the operating margin for the company was 7.6%. The operating margin has fallen -2.7% during the last 12 months. The company is working to improve the retail stores, according to insiders. RadioShack just opened some concept stores, which are designed to reposition the brand and give a fresh look to the retail stores. The company opened it third high-touch store during August on Long Island. The stores feature a speaker wall and interactive designs that will help shoppers experienced technology on site.