Here's Why RadioShack Is Suffering an Identity Crisis
This story has been updated from 11:12 am EDT to include comments from Gary Lee of InReality and a stock price update.
NEW YORK ( TheStreet) -- Shares of RadioShack
Net sales slid 13% to $737 million. Comparable store sales -- those stores open a year or more -- were down 14% driven by lower traffic and "soft performance" in its mobile business as consumers went elsewhere for their smartphones and tablets. Strong promotional activities from the likes of Best Buy
"Although RadioShack may have maintained ownership of the market niche of electronics hobbyists needing obscure resistors, transistors, LEDs, etc., they have lost the mainstream consumer -- perhaps forever. Without immediate and serious surgery to revamp their stores to clearly show why they matter to customers, and then deliver a compelling shopping experience to consumers in strip malls everywhere, RadioShack is doomed to continue a long slide to oblivion," Lee said in an email.
RadioShack said in March that it planned to close 1,100 stores, but that plan was amended last month over issues the company was having with its lenders about closing the stores. RadioShack said Tuesday that its expects to close 200 stores, that's about 5% of its U.S.-based stores, this year. As part of its turnaround plan, RadioShack's also CEO noted that the company is creating a pipeline of new higher-margin and exclusive products which includes partnerships with Quirky and PCH. It's also looking to remodel some stores into so-called concept stores to drive sales.
RadioShack is on Goldman Sachs "Americas Sell List." Analyst Matthew Fassler has a $1 price target on the stock.
"We expect a guarded response to these results, given that trends were below consensus forecasts. Our 12-month price target is $1.00. Our price target is based on a 3-year implied default probability of 80%, assigned by the CDS market," wrote Fassler in a research note on Tuesday morning. "The probability assigned to a turnaround is 20%. We generate a $5 price in our turnaround scenario which is based on a 1% EBIT margin and 8.0x rent-adjusted EV/EBITDAR."