Canaccord Genuity Morning Coffee on RadioShack (RSH): "Obsolescence Risk" is Never A Good Thing

Canaccord Genuity Morning Coffee on RadioShack (NYSE: RSH): “Obsolescence risk” is never a good thing.

RadioShack swung to a surprise first quarter loss, as poor prepaid wireless sales at its Sprint Nextel (NYSE: S) operation weighed on results. The loss in the first quarter was $8 million, or $0.08 per share, compared with net income of $35.1 million or $0.33 per share a year earlier. Wall Street was expecting a profit of $0.05 per share. Sales in the quarter fell by 0.9% to $1.01 billion versus the average analyst estimate of $1.06 billion. CEO Jim Gooch said, “the first quarter was extremely challenging” adding that the company is now “acting decisively” to improve its marketing. Same store sales in the quarter fell by 4.2%, largely due to a decline in Sprint subscriptions, which some analysts are attributing to tougher credit requirements from Sprint for new subscribers. The weakness at Sprint was slightly offset by improved sales at its AT&T (NYSE: T) and Verizon (NYSE: VZ) postpaid wireless business. On top of the poor results, Moody’s cut RadioShack’s credit rating to B1 from Ba2 citing the low-margin business RadioShack is in, as well as “obsolescence risk” given the types of products the company sells.

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