RadioShack's slow, painful death

The company just posted a horrible quarter and suspended its dividend. There's little hope it can turn things around in this age of 'showrooming' and online buying.

By Kim Peterson Jul 27, 2012 3:03PM
All hope is lost for RadioShack (RSH). The stock is trading below $3 and on its way to zero.

Analysts have turned on the company, and with good reason. It has simply lost its direction. That became clear this week after RadioShack suspended its dividend and swung to a $21 million loss in its second quarter from a $25 million profit a year earlier.

Shares fell to an all-time low of $2.46 after the earnings were announced. They recovered to $2.64 Friday. A year ago, shares were $14.

RadioShack made a big bet on smartphones earlier, and that's what's keeping the company hanging on. People are going there to buy cheaper, lower-margin phones. Mobile phone sales rose 3.3% in the quarter, but that wasn't enough to offset the 26.5% plunge in sales of other consumer electronics.

Analyst Michael Lasser of UBS thinks RadioShack is suffering from an identity problem. It's tried to become a phone and mobility product seller, but that hasn't resonated with consumers, Lasser wrote in a recent note. He lowered his price target on the stock to $2 from $3. "RSH's efforts to address its problems reflects 'more of the same' thinking," he wrote.

You can hear more from Lasser in the following video.

Post continues below.
RadioShack still has 4,700 stores across the country, often in small strip malls with low rent. The stores don't have much traffic, and half of their space seems devoted to phones at this point. When I go into a RadioShack store (which isn't often, I admit), I get immediately approached by the overly aggressive sales staff asking to help. There isn't much opportunity for browsing or spontaneous purchases; you get what you need and leave.

RadioShack's profit margin tumbled in its most recent quarter to 37.8% from 45.9%.

The Motley Fool thinks RadioShack could improve its business by selling things that people actually want to buy, such as an Apple (AAPL) iPhone service desk or a universal remote programming station. That might generate more interest than sales of batteries or remote-controlled cars. "The only problem is that doing something that logical might cost the company its prized title as the worst retailer ever," writes a snarky Michael Lewis.

Maybe RadioShack could become the Brookstone of electronics accessories, selling higher-end items you don't need but that seem pretty nifty. It's a long shot.

RadioShack is trying to sell itself to shoppers again. Its launching a new advertising campaign soon asking the question "Why RadioShack?" It may be able to improve awareness of its brand, but that won't help two of RadioShack's biggest problems: People buy electronics online and from big-box retailers, and the business of selling cheap, low-margin phones has no future.

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24Comments
Jul 27, 2012 6:00PM
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Here is a letter I sent to the CEO last week...

 

 

A little over 40 years ago, I purchased my first Realistic brand AM/FM transistor radio. A year later I purchased a Realistic brand multi-band receiver. A few months later I bought a Realistic brand AM/FM car radio, then a Realistic brand portable cassette player, then a Realistic brand Home Stereo system, then upgraded my speakers with Realistic brand, then purchased a Realistic brand eight-track tape deck then a cassette tape deck. Not to mention all the wires, connectors and other parts. I was also a hobbyist and purchased numerous kits.

30 years ago, I up-graded my entire Home Stereo system with Realistic brands, I purchased a state-of-the-art record turntable with a direct-drive motor with strobe light, then my wife purchased a Realistic brand radio/alarm clock with cassette player.

25 years ago, I purchased for my children, Realistic brand portable cassette players (like a walkman), then bought them Realistic brand stereo systems for their bedrooms, then Boom Boxes for the beach, then Realistic brand radio-controlled cars, electronic chess game and many other items while the kids lived at home.

Then everything came to a halt! The Realistic brand that I had come to love and trust basically dropped off the face of the earth and your store was like every other store. No more Realistic brand with proprietary merchandise. You only sell the same thing everybody else sells.

Yes, the Internet has changed the way buyers purchase. And Yes, buyers are using “brick and mortar” stores to see and touch the merchandise so they can shop the internet for the lowest price.

But here is a thought…. If you go back to your roots of over 40+ years ago, you could offer Radio Shack products which can only be purchased at Radio Shack stores, like you used to do. You can create a whole new generation(s) which will be loyal to Radio Shack and their quality brand, Just like me, my family and the millions of families over the last 40+ years. I would like to see Radio Shack back on the top of consumer electronics again. Believe, take action and it will happen!

Jul 27, 2012 5:02PM
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You have to be of a certain age to remember when Radio Shack was a cool place to go.   A place to go where you could get electronic parts and gadgets you couldn't find other places.   A place where you could actually take some things to be fixed.  A place from a bygone age where everything electronic wasn't disposable and made in China.

 

The guy behind the counter was a geek and proud of it, and he had the answer to your question about what you were buying, or looking to buy.   And if he didn't have the answer for you right then, he could get the answer for you in a matter of minutes.  Seems you don't find that at Radio Shack much anymore, or many other places for that matter these days.

Jul 27, 2012 4:03PM
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I will miss the shack, I used to be able to get electronic parts there. Anymore they don't have what I am looking for and "No...my phone is fine THANK YOU". They have lost their identity and market-share to cheap throw away electronics made in China that aren't worth the time to fix.

Radio Shack is another victim of a bygone era same as the bookstores, mall department stores, and video stores. 

Jul 27, 2012 3:43PM
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hate to see radio shack go , i bought some of my best toys there , an parts there too
Jul 27, 2012 4:52PM
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My problem with RadioShack is their inventory. I was building an electronic firing box for fireworks and I needed certain parts. You can't get that stuff at Best Buy but I could always count on RadioShack for it... not anymore. RadioShack.com had 99% of them but the store had less than 10%. I know it is easier to carry more products online but RadioShack is over the top. Their stores are worthless.
Jul 27, 2012 7:09PM
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I work on electronics as a hobby, and Radio Shack just dosen't sell what I need any more, go in one and ask for an electronic part and you'll get a blank stare from some doofus whos there to sell phones and knows nothing else......
Jul 27, 2012 6:05PM
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You have to provide good customer service and most of the Radio Shack stores don't.   Why does RS require all personal information everytime you buy something in the store even if just $1.  Its a waste of time and slows customer service so it has become the last place I go for misc electronic supplies.   Make it easy for the customer!!
Jul 27, 2012 7:19PM
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Radio Shack was once a great place to  shop especially if your were into electronics.  Then they tried to become a retailer and no longer carried a lot of the items I used to shop there for.  Finally it got to point that every time I went they were out of it or did not carry it any longer.  Rarely do I go there anymore.  Service is poor and the knowledge of the young sales staff is almost none existent.
Jul 27, 2012 6:26PM
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no name says alot and all is true, Radio Shack needs to be like before and people will come, or even shop online and pick up. This type of product gave way to the bigger suppliers of electronic components yet survived while most of those over priced giants have fallen. It is time to get the savvy people back and lose these overly cologne wearing pimple faced phone venders an education on simple customer service, saying I will be with you and weighing out sales is a sure way to die...
Jul 30, 2012 8:51AM
Jul 27, 2012 7:33PM
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Do any of you remember a big box store called Circuit City, the biggest rival of Best Buy...... I liked Circuit City, they literally closed over night in some areas......They had Tv's, Dvd's, Blu-rays, in-car stereo system hook ups and home stereo system hookups AND cell phones......i hate the fact that radio shack survived and Circuit City didn't...... when Circuit City closed here in the L.A. area a LOT of people said the same thing... TAKE RADIOSHACK INSTEAD ! but no... so now they are on the verge of collapsing...... my lil bro went to the one on Woodruff and South street here in Lakewood California, he got a pair of $20 headphones with his own money..... they broke in 2 days BUT we had a warranty that he paid an extra 5 bucks for......... we were literally forced to pay half for the new headphones AND buy a new warranty, wich i did not and left the broken ones there for her to deal with........... and the cashier/service lady was not helpful at all......... long story short........ we will never go back again..........
Jul 27, 2012 6:14PM
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I could solve their problems with one simple solution.

 

Close all of the stores that are in in-door malls, the extra costs isn’t’ worth it and re-open out door easy access stores.

 

The geeks and others who like to shop there don’t shop at malls…its that simple.

 

Their only other option is to close all the stores and just do e-commerce.

Jul 28, 2012 1:38PM
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Change name to Phone Shack or Mobile Shack and get rid of the "old".
Jul 27, 2012 4:34PM
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Unfortunately, almost everything you can get from Radioschlock you can get from Amazon. Why bother with RSH--unless your looking for a good short! They simply have not come up with a decent business model for this economy, although there are some smart people out there who could, but RSH would rather spend their money on fruitless advertising than smart people. Bad move.
Jul 28, 2012 4:12AM
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The first thing I would think about changing is the name of the company.  It is outdated and obviously not generating good will but ill will.  Along with a name change a comprehensive revamping of the product and service mix would help wipe the slate clean and possibly reinvigorate
their business model.

Jul 30, 2012 11:19AM
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radio shack is know for hobby electrical place and should fouse on that and may carry some accessory for their electric motors. it hard to find gears and shafts for the motors.
Jan 8, 2013 2:05PM
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I writing to let you know I am no long going to purchase products from Radio Shack after being a customer of yours for many years. My first experience with Radio shack was in the Seventies when you opened a store in Everett Washington. The store at that time was noted for Electronic Parts, Stereo Equipment, computers, scanners, two way radios, and good service.

 

This reputation in opinion is not longer true based on a recent attempt to locate a part for an Optimus Mach 3 speaker which has a bad woofer. I located the fax back document for the 400-4039 speaker enclosure and got the part number for the woofer I needed. I called your parts center like I have done so many times in the past to order parts.

 

When I called the main number on the fax back document operator had no clue what a parts dept was and when I did get to a person who tried to help me they had no idea what I was talking about. The person kept trying to refer me back t the store. The products you do stock do not interest me and frankly going to your stores is a waste of time for me anymore.

 

Fry’s here in the Seattle area does a much better job and will be getting my business now on since they carry a lot of the items you used to. Maybe you should change your name. You are not Radio Shack anymore.  Your just another computer phone store and that is it.

 

Jan 1, 2013 6:29PM
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The first big mistake they made was to discontinue their yearly catalog, from the tine I was 10 years old I really looked forward to go into the radio sack store pick up my copy and heck out all the new products. 
The other mistake they just are not an electronic hobbyist retailer ay more. I am lucky if Zi go ther once a year to buy a fuse, and the last time I did they did not have the one I needed.
Unless this corporation wakes up and sees the error ofteir ways, and goes back o what they used to be they will surley end up out of business.
Jul 27, 2012 6:57PM
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They need a Steve Jobs to swoop in and save the day
Jul 27, 2012 6:14PM
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They are a joke....the shack......what a brilliant marketing effort.....they must have been on steriods......or was that just Lance?
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