BBY Stock vs. RSH Stock: Is Either Struggling Retailer Worth Your Cash?

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It’s beginning to look like electronics retailers Best Buy (BBY) and Radio Shack (RSH) are in a race to the bottom. Sure, JCPenney (JCP) and Sears Holding (SHLD) are the poster boys for retail incompetence these days, but BBY and RSHare giving those department stores a run for the money.

bby-stock-rsh-stockBBY stock and RSH stock have been bleeding for years, caught between the rock of Amazon (AMZN) and the hard place of Walmart (WMT). Neither retailer can compete with online prices, or always low prices. As such, both BBY and RSH are suffering from the dreaded “showrooming” syndrome. That’s where customers research a purchase in person at a store, only to buy it online at a lower price later.

Really, there’s only reason to care about BBY stock or RSH stock. See, when stocks get clobbered as hard as these guys, there the potential for a huge killing on a rebound — even if it’s incredibly unlikely.

Best Buy stock is a great example of this phenomenon, as shares more than tripled last year after being all but written off in 2012. Radio Shack stock, meanwhile, actually put up some market-beating gains in the aftermath of the last recession. Its turnaround may not be probable, but it is possible.

Let’s take a look at BBY stock and RSH stock to see if either is worth a dime of your portfolio:

BBY Stock Goes From Worst to First … to Worst Again

bby-stock-best-buy-stockIt’s hard to believe it now, but Best Buy (BBY) had an incredible 2013. Indeed, shares of BBY stock gained 237% last year, making it the third best-performing stock in the S&P 500. Even more amazing was that Best Buy stock came back after a horrid 2012, when it fell 50% because it looked dangerously close to going bust.

Easy come, easy go. A rotten holiday selling season flipped the sentiment on BBY stock like a switch. Best Buy sales fell 2.6% year-over-year to for the nine weeks ended Jan. 4, while comparable-store sales dropped 0.8% over the period. Compounding the pain was the fact that Best Buy got into a price war with Walmart during the holidays, meaning margins were squeezed even more than usual.

Those terrible numbers forced Best Buy to lay off 950 employees and sparked the worst selloff in BBY stock in more than a decade. We’ve just begun February and Best BuY stock is already down 42% for the year-to-date.

Whatever hope there was last year that Best Buy’s painful restructuring might actually work was dashed on the shoals of holiday sales. It’s going to take a miracle for BBY stock to gain any traction anytime soon.

Hey RSH Stock, the 80s Called. They Want Their Share Price Back

rsh-stock-radioshack-stockRadio Shack’s (RSHSuper Bowl commercial was pretty cute, but it also served as a reminder that RSH stock has been a rathole for decades. Radio Shack stock went for around $7 a pop in the mid-80s. Today it costs less than $2.50.

Heck, RSH stock has lost 96% since hitting its all-time high back in 1999. At this point, a complete refresh of its stores — as promised in the Super Bowl ad — looks akin to putting lipstick on a pig.

RSH stock rose just 23% last year, lagging the broader market by 7 percentage points. For the year-to-date, it’s off 4%, which is actually slightly better than the S&P 500. But maintaining that sliver of outperformance seems like a long shot. Radio Shack has logged seven straight quarters of losses, and the upcoming quarters are projected to be losers too.

About the best thing you can say for RSH stock is that the company is expected to report a narrower loss in 2014 vs. the year-ago period. Analysts, on average, forecast a loss of $1.27 a share again last year’s loss of $2.09. Progress, yes, but still no profits.

Radio Shack has a new management team charged with turing around the retailer. New store formats and cutting the number of stocked items are supposed to help. But, as Warren Buffett famously said: Turnarounds seldom turn.

The Verdict: BBY Stock or RSH Stock

bby-stock-rsh-stockIf you’re looking for some 2014 losers to harvest for tax losses, you might as well buy both BBY stock and RSH stock, just in case one of them confounds expectations and actually posts a gain.

It’s very hard to make a long case on either of these names. The most interesting thing about them is that they have held on so long when the playbook is to go bust. Just look at what happened to Circuit City.

Then again, as Best Buy stock proved last year, it only takes a little progress on the turnaround front to generate some triple-digit-percent gains.

BBY stock is almost certainly not going to post another year like last year. The easy money has been made. RSH stock isn’t a screaming buy, either, but it has gained interest from Litespeed, a hedge fund based in New York, which took an 8% stake in the stock.

For that reason and no other, hedge fund interest makes Radio Shack stock look like the better bet for 2014. Of course, what both BBY stock and RSH stock really need is for Carl Icahn to get involved.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/02/bby-stock-rsh/.

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