RadioShack: 3 things to watch Tuesday

The electronics chain is set to release quarterly numbers, but those are secondary to these details.

By InvestorPlace Oct 21, 2013 12:29PM

People walk past a RadioShack store in Manhattan on July 26, 2012 in New York City (© Mario Tama/Getty Images)By James Brumley

iplogoIf history is any indication, the RadioShack (RSH) earnings report scheduled for Tuesday morning could create more than a little havoc for the stock.

Shares tanked 13% in just two days on the heels of RadioShack's last earnings announcement, and they ultimately lost 16% before the bleeding stopped two weeks later.

Of course, with RadioShack earnings coming in much more in the red than expected, investors were understandably spooked. The struggling retailer lost 53 cents per share versus estimates of only a 24 cent loss, which happened to be the worst quarter in well over a decade for the electronics chain, revenue-wise as well as income-wise.

Last quarter's earnings miss is the least of shareholders' worries, however. Of the past 12 RadioShack earnings announcements, RSH has fallen short of estimates in nine. And earnings have gotten progressively more troubling during that time, falling from a per-share profit of 41 cents in the second quarter of 2010 to Q2 2012's loss of 53 cents.

As for Tuesday's announcement, the pros believe the RadioShack earnings figure will be sequentially better, but worse on a year-over-year basis. The latest estimates call for a loss of only 36 cents per share, down from the 33 cent loss taken in the third quarter of 2012. Sales are projected to fall from $1 billion a year earlier to $893.4 million for the third quarter as the company continues to work its way through plans to close approximately 500 of its 4,400 stores.

RadioShack earnings are secondary, however, to the more important perspective that investors are going to hear during the earnings call, also scheduled for Tuesday morning. RadioShack stockholders will be far more interested in hearing about the organization's turnaround efforts.

Specifically, in the wake of a wave of RSH store closures, the market wants to know if the new "concept and brand statement" stores are doing what a few thousand of the company's existing stores have struggled to do. More than 100 of these specialized RadioShack units should be up and running before the end of the year.

Also of interest will be RadioShack's relaunch of a private-label credit card. Broadly speaking, credit cards are profit centers for retailers, and also encourage more spending by cardholders. Private-label credit tends to work best for department store retailing, though, and it remains to be seen if more than a handful of customers will believe they spend enough money at RadioShack stores to bother with a branded credit card.

Finally, potential and current shareholders will be waiting to hear progress on the liquidity front during the RadioShack earnings conference call on Tuesday. One of the company's biggest challenges to the turnaround effort has been a lack of cash. Without new funding (most likely through the issuance of debt) and/or a radical turnaround of business, RadioShack could be insolvent at some point in 2014.

The RadioShack earnings report is slated for Tuesday morning, with the earnings call scheduled to begin at 9 a.m. ET. Given the history of RadioShack stock and the company's ongoing struggle, the fireworks could be well underway by the time the opening bell rings.

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

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