RadioShack Initiated as Neutral

We initiate coverage for RadioShack Corp. (RSH) with a Neutral recommendation. The company is one of the leading consumer electronics specialty retailers in the U.S., offering innovative products and services from leading brands. RadioShack has operations in Mexico also. The company has approximately 4,470 company-operated stores; almost 1,300 dealer outlets; over 450 wireless phone kiosks throughout the U.S. and approximately 200 company-operated stores in Mexico. 

The wireless category, which represents one-third of total sales, is likely to continue its impressive performance in near future. In the reported quarter, RadioShack generated increased revenue from Sprint Nextel (S) postpaid wireless business. The introduction of T-Mobile, a division of Deutsche Telekom (DT) in company operated stores and Verizon Wireless (VZ) in Sam's Club Kiosks enhanced RadioShack’s mobility proposition. The company now offers a broad range of products from AT&T (T), Sprint Nextel, T-Mobile, and Verizon Wireless. RadioShack has also started selling Apple Inc’s (AAPL) 3G iPhones in 10 company operated stores. 

RadioShack is working to make its stores even more profitable through in-store improvements. With a store seemingly in every town, RadioShack creates a near-ubiquitous feel that connects to consumers all over the U.S. Nevertheless, consumer electronics retail market is highly competitive. Ongoing economic downtrend may also generate sales volatility in the near-term. We believe the positive factors are already reflected in the current valuation leaving little room for above market gain.

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