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The nightmare of RadioShack Corp. (RSH - Analyst Report) persists as the company continues with its disappointing performance. The company’s second-quarter 2012 financial results were well below the Zacks Consensus Estimates. Going forward, RadioShack has decided to suspend its dividend payment program to reduce total debt, which in turn, will minimize its debt-to-equity ratio.
GAAP net loss from continuing operation, in the second quarter of 2012, was $21 million or a loss of 21 cents per share compared with a net income of $23.5 million or 23 cents per share in the year-ago quarter. Quarterly earnings per share of a loss of 21 cents were nowhere near the Zacks Consensus Estimate of an income of 3 cents. Quarterly net revenue was $953.2 million, up 1.2% year over year, but well below the Zacks Consensus Estimate of $973 million.
Quarterly gross profit was $360.3 million compared with $432.1 million in the prior-year quarter. Gross margin was 37.8% in the reported quarter compared with 45.9% in the prior-year quarter. This was mainly due to unfavorable sales mix toward lower margin smartphones and other mobile devices coupled with higher percentage of mobility sales due to expansion of kiosks within Target Corp. (TGT - Analyst Report) stores.
Quarterly Selling, General, and Administrative expenses were $362.5 million compared with $364.3 million in the year-ago quarter. Operating loss in the second quarter of 2012 was $21.2 million compared with an operating income of $48.9 million in the year-ago quarter. The Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) remained flat year over year. This is a key retail performance indicator measuring growth from the existing sales locations.
During the first half of 2012, RadioShack generated $22.9 million of cash from operations compared with $101.5 million in the year-ago period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was a negative $4.8 million compared with a positive $60 million in the prior-year period.
At the end of the second quarter of 2012, RadioShack had $517.7 million of cash & cash equivalent compared with $591.7 million at the end of 2011. Total debt, at the end of the previous quarter, was $679.3 million compared with $670.6 million at the end of 2011. At the end of the second quarter of 2012, debt-to-capitalization ratio was 0.31 compared with 0.47 at the end of 2011.
Segment wise Results
U.S. RadioShack Company-operated storesegment, which is the prime contributor of total revenue, was down 3.2% year over year to $772.4 million. Operating income was $72 million, down 47.5% year over year. Within this segment, Mobility sales were up 3.3% year over year. Signature revenue was essentially flat year over year. Consumer Electronics sales were down 26.5% year over year.
Other segmentrevenue increased 25.5% year over year to $180.8 million. The increase was primarily driven by Kiosk roll out in Target Stores. Operating loss was $1.5 million compared with an operating loss of $6.1 million in the prior-year quarter.
RadioShack currently enjoys a long-term Neutral recommendation. Additionally, it holds a short-term Zacks#4 Rank (Sell) on the stock.