RadioShack lost money in its first quarter as sales dropped, particularly in U.S. stores, and shares in the electronics retailer tumbled to their lowest point in more than 30 years on Tuesday.
The chain's troubles are symbolic of wider problems in the brick-and-mortar electronics industry. RadioShack and Best Buy Co. have struggled as shoppers increasingly move away from devices like computers and cameras to buy tablets and smartphones, which are less profitable for retailers.
Stores are also dealing with consumers "window shopping" in stores but buying products for less from online competitors such as Amazon.com Inc.
RadioShack, based in Fort Worth, Texas, said Tuesday that it is boosting its marketing efforts for its mobile products and plans to open about 50 new company-owned stores in Mexico this year in an effort to stimulate growth. The company said 2012 would be "another challenging transition year."
Moody's Senior Analyst Mickey Chadha said that, if RadioShack wants to concentrate more on less profitable products like smartphones, it will need to cut costs. Moody's reduced some of RadioShack's credit ratings on Tuesday, including its corporate family and probability of default ratings, which it lowered two notches in junk status to "B1" from "Ba2."
Fitch Ratings also downgraded the company on its poor performance, lowering its long-term issuer default rating two notches in junk grade territory to "B-" from "B+". The rating agency said lack of stability in the business means the outlook for RadioShack's ratings is negative. Fitch said it will be hard for RadioShack to return to historic performance levels _ or even do as well as it has the past year.
For the first quarter, RadioShack lost $8 million, or 8 cents per share. That compares with a profit of $35.1 million, or 33 cents per share, a year earlier.
Analysts predicted earnings of 4 cents per share, according to a Fact Set survey.
RadioShack's revenue for the three months ended March 31 dipped 1 percent to $1.01 billion from $1.02 billion, dragged down by lower sales from its company-run stores in the U.S. This was partially offset by the addition of 610 Target Mobile centers.
Wall Street expected $1.06 billion in revenue.
"This is not a good quarter, and highlights the increasingly difficult competitive position that RadioShack is in today," David Strasser of Janney Capital Markets wrote in a client note.
The analyst maintained a "Neutral" rating and $5.97 price target.
RadioShack said that revenue from company-run stores and Target Mobile centers open at least a year fell 4.2 percent. It sold fewer pricey Sprint mobile plans and fewer wireless handsets, laptops and home entertainment products. RadioShack sales of tablets and tablet accessories were better, as were sales of Verizon Wireless and AT&T plans.
The company said during a conference call that it is maintaining its guidance for 2012 net income to come in lower than last year's. In 2011 RadioShack reported net income of $72.2 million and adjusted earnings of $98.4 million.
Aside from the stores planned for Mexico, RadioShack said a franchise deal announced with Malaysian conglomerate Berjaya last month is part of its plans for international expansion. Berjaya expects to open 1,000 stores over the next 10 years. The agreement calls for stores to open in Southeast Asian countries such as Vietnam, Malaysia and Thailand.
RadioShack Corp. has about 4,700 company-run stores in the U.S. and Mexico, 1,500 wireless phone centers in the U.S. and about 1,100 dealers worldwide.
Its shares slipped 63 cents, or 10.6 percent, to close at $5.34 Tuesday. Earlier in the session the stock fell to $5.27, the lowest point in more than 30 years. RadioShack's stock has dropped 45 percent so far this year.