Radioshack reported earnings last week, so I thought I’d just give a quick update.
Results were a tad disappointing, as weak sales trends on the T-Mobile side and loss of Sam’s Club kiosks dragged strong performance by AT&T and Sprint and the roll out of Target kiosks. Other than that, there were no real changes to my thesis during the quarter.
However, after announcing results, the company announced they were raising $300m of debt (ended up raising $325) for general corporate purposes, including stock buybacks. Given they had basically no net debt at quarter end and are raising about 1 years worth of EBIT, I think the debt raise is a great move. It allows them to buy back ~20% of their stock at current market prices. I think the stock is substantially undervalued, so it should be extremely accretive to the remaining shareholders. The company also took advantage of low interest rates to lock in long term debt at a relatively low price.
One interesting note about the debt raise that I’ve yet to hear anyone discuss- if you read Fitch’s press release reaffirming RSH’s corporate ratings, it talks about RSH paying dividends of “about $30m per year.” They currently pay a dividend of ~$25m per year, and given the substantial share buybacks it could be less at this point. This could imply the company is planning for a small dividend raise in addition to the share buybacks.
Also, be sure to check out this nice little review of the RSH story here.
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