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RadioShack's CEO Walks Out

Zacks Equity Research

The nightmare for RadioShack Corp. (RSH) persists as the company’s chief executive officer (CEO) James F. Gooch resigned from the post with immediate effect. Dorvin Lively, the company's Executive Vice President and Chief Financial Officer will succeed as an interim CEO until the company finds the right person for that role.

RadioShack’s poor performance during the last few years has forced Mr. Gooch to vacate the CEO position and simultaneously step down from the board of directors. The company has already hired an executive search firm to give them a perfect replacement.

Mr. Gooch, 45, had been in RadioShack since 2006, as CFO and thereafter succeeded Julian Day as CEO in May last year. However, the company’s performance continues to deteriorate further mainly attributable to slowdown in the consumer electronics demand coupled with lack of footfall in its retail outlets and stiff competition from the likes of Best Buy Co., Inc. (BBY) and Wal-Mart Stores, Inc. (WMT).

Moreover, selling of Apple Inc’.s (AAPL) low margin iPhones and other smartphones/tablets have further affected its margin growth. In addition to these, the company also has suspended its current dividend plan to reduce its debt burden.

However, the current scenario for RadioShack may change mainly based on such structural changes coupled with the launch of new iPhone 5 and its related accessories.  Moreover, rollout of more retail outlets in the U.S. and Mexico will further act as tailwinds for the company going forward.

We maintain our long-term Neutral recommendation on RadioShack. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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