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RadioShack Corp. Message Board

  • sync2l12 sync2l12 Nov 21, 2012 6:13 PM Flag

    S&P cuts Radio Shack to CCC+ Huge Downgrade !!.

    Wed Nov 21, 2012 4:05pm EST

    Overview
    -- In our view, U.S. consumer electronic goods and services retailer
    RadioShack's continued poor operating and financial performance trends will
    continue over the near term because of fierce competition and a mix shift
    toward lower-margin mobility products.
    -- We believe that it will be very difficult for the company to improve
    its performance and gross margin in the next year, given the changing industry
    dynamics, mobility accounting for more than 50% of sales, the lack of a
    permanent CEO (with a comprehensive strategy for the company) and chief
    merchandising officer .
    -- We are lowering our corporate credit and senior unsecured debt ratings
    on the company to 'CCC+' from 'B-'.
    -- The outlook is negative, reflecting our view that if there is
    deterioration in the company's liquidity position, we would consider lowering
    the rating.

    Rating Action
    On Nov. 21, 2012, Standard & Poor's Ratings Services lowered its corporate
    credit and senior unsecured debt ratings on Fort Worth, Texas-based RadioShack
    Corp. to 'CCC+' from 'B-'. The outlook is negative.

    The recovery rating on the senior unsecured debt remains '4', indicating our
    expectations for average (30% to 50%) recovery in the event of a payment
    default.

    The downgrade of RadioShack reflects our view that it will be very difficult
    for the company to improve its gross margin in the fourth quarter of this
    year, given the highly promotional nature of year-end holiday retailing in the
    wireless and consumer electronic categories. It is our belief that all
    segments of the company's business will remain under margin pressure for 2012
    and into 2013.

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