RadioShack is Doomed (RSH, BBY, WMT, TGT, COST, VZ, VOD, S, T)

Shares in RadioShack Corp. (NYSE: RSH) are trading lower today than they were five years ago. The stock peaked in July 2007 at around $35/share and hit a low below $7/share in March 2009. The shares bounced back to about $24 last March, but have moved down since then and there’s not much the company can do to stop it.

RadioShack reported EPS of $0.33 on revenue of $1.06 billion. In the same period a year ago, the company reported EPS of $0.39 on sales of $1.04. Analysts were forecasting EPS of $0.35 on revenue of $1.07 billion.

Compared with Best Buy Co., Inc. (NYSE: BBY), which is down 40% in the past five years, RadioShack is holding is down slightly. The problem is that both electronics retailers are competing with larger players. Wal-Mart Stores, Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), and Costco Wholesale Corp. (NASDAQ: COST) all sell a lot more electronics gear than does either RadioShack or Best Buy.

By the middle of this year, RadioShack will no longer operate kiosks in 417 of Wal-Mart’s Sam’s Club stores. The company expects to take a $10 million-$15 million hit to its kiosk earnings in 2011 due to the change.

In the first quarter, kiosk sales were up $28.9 million year-over-year. But operating income from kiosks was just $2 million, compared with $8.5 million in the same period last year.

It plans to make up for the losses by doubling the number of kiosks the company operates in Target stores, from about 850 to around 1,450 by mid-year. The Target kiosks won’t make up the whole difference though because they do not sell calling plans, as do the kiosks at Sam’s Club stores.

What’s worse is that once the Sam’s Club switch is made, RadioShack will have no business relationship with Verizon Wireless, owned jointly by Verizon Communications Inc. (NYSE: VZ) and Vodafone plc (NASDAQ: VOD). The leaves just Sprint Nextel Corp. (NYSE: S) and AT&T (NYSE: T), which is now in the process of acquiring T-Mobile from Deutsche Telekom AG.

Even worse, RadioShack has fought with T-Mobile since February, claiming that T-Mobile breached the contract between the two companies in unspecified ways. Apparently, RadioShack is unhappy with what it believes to be uncompetitive product offerings from T-Mobile. In today’s earnings release RadioShack noted that discussions with T-Mobile are “constructive” and that the matter is expected to be resolved.

Once the AT&T acquisition of T-Mobile is complete, RadioShack has even less leverage with either of the two largest wireless carriers in the US. Sprint Nextel can’t save it.

The main thing that keeps RadioShack stock at a decent level is the possibility of a buyout. With more than 4,600 company-operated stores in the US and kiosks and international outlets, RadioShack does have something to offer. But not at a premium to its share price of around $15/share. Its P/E ratio for the trailing 12 months is around 9, and its forward P/E is closer to 8.

A buyer would have to offer at least $2 billion for the company, and likely more. With all the action in retail buyouts by private equity firms lately, it’s surprising that RadioShack is still available. That alone should say something about its prospects.

RadioShack stock is down more than-3.5% in early trading this morning, to $15.25, in a 52-week range of $13.61-$23.98.

Paul Ausick