RadioShack Corporation (NYSE:RSH) reported its 1st quarter earnings for 2012 today and needless to say it was not good. The company reported a loss of $0.08 per share and revenue of $1.01 billion. Analysts wanted a profit of $0.04 a share on revenue of $1.06 billion.
Unfortunately, this is yet another sign of a troubled electronic retail market. Competitor, Best Buy Co., Inc. (NYSE:BBY), has also been in a downward spiral lately that has made people ask whether or not they will be able to survive.
Management told shareholders that 2012 was going to be “another challenging transition year” as the company announced they would be stepping up marketing campaigns and opening 50 new stores in Mexico this year to help stimulate some growth.
This earnings loss is just yet another sign that online retailers such as Amazon.com, Inc. (NASDAQ:AMZN) are continuing to draw traffic and sales away from retail corporations such as RadioShack and Best Buy. This can be attributed to better deals online and gas prices.
How many times have you been in a store and realized that you could get that same exact item from a fraction of the price online? Well that is why retail companies are suffering because Amazon and other online stores just offer a better deal, plain and simple. As if that wasn’t enough, the high price of gas essentially counteracts the want to drive to a store and do shopping. Consumers would rather pay the $3.99 shipping online and not leave the house. Basically, it just makes sense to buy online if you are stretched for money and do not need the product right away.
RadioShack and Best Buy need to figure out how they can competitively lower prices without sacrificing underlying numbers too much so that they can drive traffic back into the stores. Ultimately, that is the only way they are going to survive is if they offer deals that are more attractive than the deals the online stores are making. If they fail to make the necessary changes, RadioShack and Best Buy could go the way of Circuit City within a year to two years.
The bottom line, high gas prices and better deals online are putting electronic retailers in a strangle hold. The only way to get out of it is to step up advertisements and lower prices. Unfortunately, these two can hurt underlying numbers but the alternative for these brands is not ideal.
