RadioShack Cost Cuts Way Too Late To Save Them, Says Wedbush


In a research report published Thursday, Wedbush analyst Michael Pachter reiterated an Underperform rating on RadioShack (NYSE:RSH), with a $0 price target, following the company’s fiscal third-quarter results, posting revenue of $650 million, compared with Wedbush estimate of $703 million and consensus of $717 million.

Pachter commented: “RadioShack is late to the party in focusing on reducing costs, including a substantial reduction in marketing spend and store closures. Negotiations with creditors remain at an impasse, preventing the company from pursuing its initially announced plan of closing up to 1,100 stores, but the company has focused on controllable cost reduction, reducing store operations and regional management expenses by $100 million, corporate expenses by $21 million, marketing expenses by $105 million, professional fees by $41 million, in-store expenses and other overhead by $28 million and accelerating store closures (despite strong resistance from creditors), which management expects to contribute another $90 million.”

The analyst concluded, “Reiterating our UNDERPERFORM rating and 12-month price target of $0 as declining CE sales and continued margin erosion will likely compel the company to enter bankruptcy in order to pursue its turnaround. Our price target reflects our expectation that creditors will force a reorganization and wipe out RadioShack’s equity.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a total average return of 0.8% and a 46.9% success rate. Pachter has an 53.4% average return when recommending RSH, and is ranked #1678 out of 3403 analysts.

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