Fans of the original Star Trek series know that being beamed down on a U.S.S. Enterprise mission while wearing a red shirt can be hazardous to your health.
The extras typically cast as engineering, security, and operations characters accompanying the show’s stars — standing out in their red shirts — were easy pickings for the baddies. They may beam off the ship with confident swagger, but they’re destined to perish as casualties of intergalactic combat.
Star Trek Into Darkness hit theaters this weekend, so I figured now would be a good time to go over a few stocks destined to perish. These stocks bounced nicely off their recent lows, but they’re most definitely wearing red shirt.
Everyone but the longs know how things will end.
Sales fell in 2012, and analysts see another slide this year and yet again in 2014. RadioShack Corporation (NYSE:RSH) posted a loss last year, and Wall Street sees annual deficits continuing through at least 2016 — and that’s if the chain even lasts that long.
RadioShack Corporation (NYSE:RSH) may have thought it could use its attractively leased strip-mall locations to stand out by offering wireless devices across the major carriers, but telco providers know how to keep customers buying directly after they land them.
Best Buy Co., Inc. (NYSE:BBY) is in much better shape than RadioShack Corporation (NYSE:RSH). It’s profitable, at least. However, what becomes of these cavernous stores that used to stock CDs, DVDs, and video games as media consumption continues to migrate away from physical copies?
Right now, Best Buy Co., Inc. (NYSE:BBY) benefits from the digital migration as folks buy tablets, smartphones, and smart TVs from Best Buy Co., Inc. (NYSE:BBY) — but what happens when they don’t need to return to Best Buy Co., Inc. (NYSE:BBY) for media? What happens when more people realize that these same products can be had for less online? Best Buy Co., Inc. (NYSE:BBY) will need to shrink its footprint in the coming years or start selling boats and RVs.
Spoiler alert: Best Buy won’t be selling boats and RVs.
So why exactly did GameStop Corp. (NYSE:GME) hit a new 52-week high on Friday?
GameStop Corp. (NYSE:GME)’s been rallying given a huge short position that’s getting squeezed out, but just wait until Thursday’s quarterly report. It’s the bulls that should be getting nervous here, especially after GameStop Corp. (NYSE:GME) slashed its same-store sales guidance four times in its most recent fiscal year.
Have you ever read a book knowing exactly how it’s going to end?
I can do that for Barnes & Noble, Inc. (NYSE:BKS).
It’s final chapter will end with these three words … just like Borders.
I’m not being cruel. Barnes & Noble, Inc. (NYSE:BKS) is selling books at a time when digital e-readers are taking over. Yes, Barnes & Noble, Inc. (NYSE:BKS) is a force there with its Nook, but the market is too cutthroat for Nook to ever catch up to Kindle as the digital book platform of choice.
However, with or without this deal, what becomes of Barnes & Noble, Inc. (NYSE:BKS)? It’s in the same boat as Best Buy with stores that are too big for the downward spiral of book sales.
Barnes & Noble, Inc. (NYSE:BKS) has lost money in its last two fiscal years, and Wall Street sees that continuing for the next few years. Sales have been slipping, and should continue to slide. This certainly seems a lot like Borders.
Beam me down, Scotty
These four red-shirted retailers won’t perish at the same time.
RadioShack Corporation (NYSE:RSH) will be an early death. Barnes & Noble should follow shortly, especially as investors realize that its cash-sapping Nook business isn’t as valuable as Microsoft thinks it is.
GameStop Corp. (NYSE:GME) and Best Buy may last a little longer. GameStop’s model is still very profitable, and its balance sheet is solid. That may be enough to have it outlive Best Buy, even though its model will perish first.
One way or another, these confident stocks aren’t going to beam back up alive.
The article 4 Red-Shirt Retailers Destined to Die originally appeared on Fool.com is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of GameStop, Microsoft, and RadioShack.
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