For RadioShack, it's make-or-break time

The long-suffering electronics retailer needs a Best Buy-style turnaround, but it has to move quickly.

By Jonathan Berr Jul 24, 2013 9:39AM

When RadioShack (RSH) CEO Joseph Magnacca, its fourth leader in three years, announced the company's quarterly results Tuesday morning, he pulled no punches, saying "our profitability was not where we would have liked."

 

In fact, most everything that could go wrong did go wrong for the Fort Worth, Tex., electronics shop. 

RadioShack's quarterly loss widened to $53.1 million, or 53 cents a share, versus $21 million, or 21 cents a share, amid heavy promotions. Revenue fell 0.5% to $845 million. Wall Street analysts had forecast a loss of 24 cents a share on revenue of $815.8 million.

 

Investors' confidence in RadioShack was further shaken by the resignation of chief financial officer Dorvin Lively and the company's decision to hire an investment bank to do what Bloomberg News described as "evaluate ways" to strengthen its finances. After an early premarket spike in price, the stock closed down more than 5% by Tuesday's end.

 

People walk past a RadioShack store in Manhattan on July 26, 2012 in New York City (© Mario Tama/Getty Images)Magnacca, a former Walgreen (WAG) executive, is in the midst of what The Wall Street Journal calls a "make-or-break transformation" ahead of the critical holiday season.


His efforts are starting to show some results. RadioShack reported a 1.3% gain in same-store sales, its first positive mark since 2010 in this key retail metric showing the performance of locations open at least a year.

 

One quarter, though, does not make a trend. RadioShack's sales have been plummeting for more than a year as the company has tried and largely failed to attract younger shoppers. Magnacca has repeatedly said turning it around will take several quarters. Whether Wall Street will give him the time he needs is another story.  

 

But investors who took a chance on Best Buy (BBY), which has also struggled, have been rewarded. That electronic chain's shares have surged more than 60% this year. Best Buy’s rebound may create additional pressure on RadioShack to match its success.

 

Investors, though, shouldn't rush to buy RadioShack. It's already up more than 30% this year on those turnaround hopes, and it's trading above its 52-week price target of $2.50. Plus, Wall Street analysts expect the company's losses to continue for the foreseeable future.

 

One of RadioShack's biggest challenges is convincing consumers who may have quit patronizing the chain years ago to give it another chance. That won’t be easy.

 

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

 

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65Comments
Jul 24, 2013 10:42AM
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Dear RS franchise owners, please hire people who know about the stuff you're selling.  No, not the radio control cars in the big pile on the floor.  The stuff at the back of the store.  Cables, connectors, adapters, routers, splitters, etc.  Maybe then you might get a client base that keeps coming back because not only do you have what they need but for us "DIY" types, we can get CUSTOMER SERVICE!!  And yes, I gladly pay more for good service/good info along with the stuff I need.
Jul 24, 2013 11:40AM
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I worked many years at RS (when you could make a pretty good living doing so).  Now all us "old-timers" have been replaced by kids under 25 who know nothing about customer service or their products.  I worked with people who had been there for over 25 years.  I spent over 5 years there myself.  Slowly the company weeded us out and replaced us with juvenile delinquents.  Our store manager with 27 years of experience was let go and replaced by a 22-year old kid.  Whats wrong with RS?  Look in the mirror RS executives and you will get your answer.
Jul 24, 2013 12:05PM
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As a former Radio Shack worker in the 90's I can tell you exactly what is wrong with the franchise.

 

1.  Customer Service, I was often told by management not to spend too much time explaining how a product worked, even going to the extent of them taking me off the clock because I helped someone with a computer or stereo components.

 

2.  If you have access to a catalog from other times (think 2000 and earlier) you will see that there isnt even a quarter of what was once sold, I sold everything from Optimus Stereo components, which were actually considered decent, to DIY electronic hobby kits, to computers. The merchandise was a million times better and more of it.

 

3. Taking on the cellular kiosk format was the dumbest thing anybody could do, it takes valuable shelf space for actual product and makes it nothing more than a fifth rate cell vendor. (you can do much better elsewhere)

 

     You want to turn it around? Offer people what they want, return to the company's roots of selling electronic components at a decent price while offering your original brands like Tandy, Realistic, and Radio Shack, there was nothing wrong with them in the past, it was really good merchandise. And finally get rid of the kids, I had to go to sales classes to be certified in selling a particular product (have RS certification for cellular, computers, and audio) AND had to wear dress shirt, tie and nice shoes!!

 

You want better clients you have to be better at what you do, and that WAS Radio Shack long ago.

 

 

 

 

Jul 24, 2013 10:15AM
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Instead wanting to help you while your in the store they always focused on getting your address and phone number at check out.  

 

I only go to RadioShack if no one else has it.   I just don't think everyone needs my info. 

Jul 24, 2013 10:26AM
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I have to been to my local Radio Shack five or six times in the last few months.  What I found was a staff that was not knowledgeable about the stock, prices that were much higher than the competition.

The one thing I bought, a speaker extensions cable, was horrible. If there is to be a turnaround, it should start with a better staff and better inventory.

Jul 24, 2013 10:01AM
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Hello?  Radio Shack's merchandise is ridiculously over priced and of sub par quality.  What would you expect? Their franchise model is a death knell to anyone gullible enough to take one on.  That is the only way they can make money: convince some poor sucker to buy a franchise and then stock it with over priced lousy merchandise.  Better it die and go away than continue to screw investors and franchisees!
Jul 24, 2013 11:26AM
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Yeah, I agree bunch of young punk teenagers working in Radio Shack that don't know their products....over priced crap!!!!!!!!!!!!
Jul 24, 2013 11:11AM
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I will never, ever, do business with Radio Shack again! 

 

A couple of years ago, I bought a top of the line telephone system from Radio Shack in Flint, MI.  It did not work right our of the box so I took it back to the store where I got it.  I asked for a replacement.  I was told that the phone system  would have to go in for repair and that would take about 3-4 WEEKS!  I ended-up throwing the brand-new Radio Shack system in the trash and went to Best buy and purchased a different phone system.

 

So just the other day, a battery died in my portable phone - and I desperately needed a replacement.  Against my own better judgment, I went in to our local Radio Shack and, sure enough, they had the battery I needed.  They wanted $39.95 for the battery - I got one at an electronics store for 8 bucks!.

 

Good bye Radio Shack and good riddance!

 

 

Jul 24, 2013 10:37AM
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I agree with Biznessowner. Radio Shack should quit focusing on out-of-the-box electronics, retro back about 40 years, and stick to selling electronics at the component level for us hobbyists. Yes, that would mean downsizing, something they're apparently going to have to do anyway. And, I hate going to Fry's.
Jul 24, 2013 10:29AM
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Hopefully it can recover. As an electronics technician it is my spur of the moment, need it now place to go (these are for items that you'll never find in a Walmart or Sams as mentioned by another post). Or, I'll try to find it in one of a few EE shops in the area.  I'll stay away from online purchases as much as possible; would rather keep the money near the community.
Jul 24, 2013 12:14PM
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Sometimes it's fun to bring in an obsolete part that has a Radio Shack Lifetime Warranty on it, and ask for a replacement.  Then watch them stammer as they try to figure out what the thing is, and how to get out of honoring that warranty.  I have several vacuum tubes and 8-inch floppy disks with that warranty - usually nobody working at the store can even recognize them. 
Jul 24, 2013 12:21PM
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Any Company that demands my phone number and address to buy a pack of batteries, has some serious customer problem issues. Also, the fantasy that "Gold-plated" 20 dollar cords are superior to the regular 2 dollar cords is just a lie, driven for profit.
They should have stayed true to hobbyists and do it yourselfers, instead of trying to be a mini-electronics Walmart/ Best Buy.
Jul 24, 2013 12:47PM
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They are doing the same thing cicuit city di-replacing exerience people with kids They are going to have the same result-extinction!.
Jul 24, 2013 10:47AM
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Next time I want to buy an overpriced, low quality electronic product, I will be sure to go to "The Shack".  They will have just what I want.
Jul 24, 2013 11:08AM
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Hmmm.  I remember the "old days" when they had their own line of computers (remember the TRS-80?) and Audio equipment (I think the brand was "Realistic").

 

They're in a sort of catch 22.  One of the reasons that I don't shop there, is because I keep forgetting that they even exist.  Remember the old slogan, "it pays to advertise".

Jul 24, 2013 12:21PM
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At least their salespeople quit trying aggressively to sell me a cell phone.  Used to be, every time I walked into a Radio Shack I couldn't get ten feet past the door before they were hitting me with the cell phone hard sell instead of asking what I was looking for.  Or they'd find me looking at something totally unrelated to phones and start their cell phone hard sell. 
Jul 24, 2013 11:41AM
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Why would someone buy a Radio Shack franchise? A fool and his money...
Jul 24, 2013 11:25AM
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every time a company closes in America one thrives in China
Jul 24, 2013 11:08AM
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I haven't been in a Radio Shack since Weird Al Yankovik did his famous song, Eat It.  Listen to it and think about Radio Shack.
Jul 24, 2013 1:11PM
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I will never go back.  Purchased a flatscreen TV; no sound came out of speakers.  Took it back same day.  Would not accept my return (or exchange...I would've been happy to try another set) because I 'opened the box'.  Could not believe it!
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