Consumer electronics stores provide opportunity for profitable investment. But declining margins, first for Abt Electronics and now Best Buy Co., Inc. (NYSE: BBY), are causing panic among investors and analysts. Even Wal-Mart Stores, Inc. (NYSE: WMT) failed to create a big impression in the sector, with declining sales in its electronics division at its last earnings call.
With sales having declined an average of 2.6 percent a year in the last five years, investors are wary of trying their luck in the sector. Analysts are looking with skepticism on the future of shares, and speculations are on the rise when it comes to long-term profit in the formerly lucrative industry. The companies making profits are associated with the fast-paced world of wireless devices and consumer electronics, and there are some emerging growth companies with future prospects in this area. One of them is RadioShack Corporation (NYSE: RSH), which offers industry leading mobile devices, consumer electronics, and personal technology.
Rated among the best performing companies by Russell for 2013, Radio Shack is touted to be a prospect for good deals in the coming quarters. This is due to its resilience in the midst of challenges and its strong momentum. Its fourth quarter consolidated gross profit was $447 million, only slightly down from $482 million for last year. Hailing from Fort Worth, TX, RadioShack is one stock that you should put on your list as it shows signs of rising above the challenges in its industry. Its phone and tablet businesses are generating sales and gross profit improvement. It has strengthened its signature platform, which generated sales growth in each quarter of 2012. It has increased its liquidity by refinancing nearly half of the 2013 debt maturity and repurchased a significant portion of this maturity at a discount. It has an agreement to operate the Target (NYSE: TGT) Mobile locations to cut losses. It has also put in place cost-cutting expenses.
Due to this, it has minimized its losses. RSH’s total 2012 net sales and operating revenue were $1.3 billion, compared to $1.4 billion last year. Its consolidated gross profit was $447 million, compared with $482 million last year. But its performance was impacted by a decline in sold postpaid units and a decrease in the gross margin due to a higher mix of smart phones. These are problems faced by other players in the industry as well.
Dorvin D. Lively, Executive Vice President, Chief Financial Officer and Chief Administrative Officer of RadioShack Corporation said, “The most significant contributing factor to the decline in our performance was the postpaid wireless business, which saw a decline in transaction volume across the year, combined with a lower margin rate. However, I am pleased with the progress we have made in improving other aspects of our business.”
The company trades at $3.05 per share and has a market cap of $303.66 million. Compared to competing stocks like Best Buy and Wal-Mart, an emerging stock pick like Radio Shack is safe for future consideration for those who are looking for a decent growth in the coming quarters. The electronic stores industry for now is slowly transforming online and in the coming months, valuation and profits will make a company like RadioShack rise to new heights. Its strength in the growth areas should see it through in the long-term.