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.
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.
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.
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.
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.
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.
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!
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".
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