RadioShack Posts Q2 Loss, Suspends Dividend, Shares Plunge

A focus on lower-margin smartphones hurt the company's earnings

   

RadioShack (NYSE:RSH) said on Wednesday that it lost $21 million during the second quarter, compared to a $24.9 million profit last year.

Wall Street had been looking for EPS of 3 cents. The loss of 21 cents a share took most analysts by surprise, Reuters noted.

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Investors slammed the stock, driving RadioShack shares down almost 29% in Wednesday mid-day trading.

The consumer electronics retailer recorded sales of $953.2 million, up 1.2% from 2011. But that fell short of analysts, who were looking for sales of $970.4 million.

The company announced that, in light of the loss, it was suspending its dividend in order to refinance roughly half of its $375 million in long-term debt.

Company officials attributed the earnings reversal to higher demand for low-margin smartphones. RadioShack has moved strongly into the handset vending market. It added Apple‘s (NASDAQ:AAPL) iPhone to its offerings, boosting customer traffic, but producing smaller margins for the retailer, compared to smartphones using Google‘s (NASDAQ:GOOG) Android operating system.

Analysts cited by Reuters confessed that they had underestimated the impact of lower smartphone margins on RadioShack’s earnings.

The retailer has also experienced management changes, including the recent loss of its merchandising director, that worry analysts.


Article printed from InvestorPlace Media, http://investorplace.com/2012/07/radioshack-posts-q2-loss-suspends-dividend-shares-plunge/.

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