RadioShack Corp. (RSH) - Bear of the Day

We downgrade our recommendation for RadioShack Corp. (RSH) to Underperform following our view that the company's profitability may suffer in 2011 due to several reasons. Transition of its Kiosks businesses from Sam's Club to Target stores will result in huge losses in operating profit.

Management predicted that pressure on gross margin will continue in the near future since the company is working hard to revamp its struggling electronics accessories segment and deploying wireless kiosks inside Target stores. A precipitous fall in demand for the non-wireless category products remain a serious concern for the company.

Additionally, we believe RadioShack is facing increasing competitive pressure from other large retail stores, online shopping stores and some mobile carriers which directly sales handsets to customers. Increasing competitive threat from several fronts may result in lower wireless sales going forward.
 
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