RadioShack Corporation (RSH), at one time a major electronics retailer, is only a shell of its former self. You still can find RadioShack stores in many cities throughout the U.S. And you still can find people who think the company can turn things around.
Still, the future doesn’t look bright.
Cash Is Coming, But It’s Not Good Enough
At this point, investing in RSH appears to be a mistake. The only good thing you can say about RSH stock is that it’s cheap — heck, if you liked it at its 52-week high of $3.88, it’s practically a steal at 85 cents, right?
However, RadioShack recently has come up with enough cash to fight through the holiday season, hoping and praying this may be enough time to get back on track.
Investors including hedge fund and major RSH shareholder Standard General LP are stepping in to help the company during this challenging time. According to the Wall Street Journal, these investors are contributing $120 million to help back RadioShack’s letters of credit.
So, RadioShack has been thrown a lifeline.
But now that RSH has enough money to get through the busy holiday season, there is another question to answer: What will the company do to improve its business, giving it a real chance at long-term success?
While true that RSH has made some big changes in major markets, such as redesigning some stores, the results have been lackluster. The problem is that brick-and-mortar electronics retailers are not what they used to be thanks to the sprawl of Amazon (AMZN) and other online retailers.
RadioShack continues to try its hand at selling smartphones, competing directly with service providers and others such as Best Buy (BBY), but the upfront capital needed to do so continues to be a major burden.
For the time being, RadioShack remains on its feet. The company still is wobbling, but it has yet to be knocked out.
With the way the company is burning through cash and the need for strong sales growth to pick RSH stock up, the final blow is coming soon.
As of this writing, Chris Bibey did not hold a position in any of the aforementioned securities.