Can RadioShack make a comeback?

With its share price plummeting and profits dwindling, the electronics chain parts ways with its CEO.

By TheWeek.com Sep 28, 2012 11:49AM

Image, CEO copyright Photodisc, Getty ImagesThis week, RadioShack (RSH) CEO James Gooch resigned after only a year on the job, the latest sign of trouble at the struggling electronics retailer, which has reported back-to-back quarterly losses. 


Like other brick-and-mortar retailers, RadioShack is facing an existential threat from online behemoth Amazon (AMZN), which sells the same goods for less. In addition, although RadioShack has identified smartphone sales as a primary area for growth, it's competing there with Apple (AAPL) Stores, plus AT&T (T) and Verizon (VZ) outlets. 


Can RadioShack win back the hearts and minds of electronics shoppers?


Yes. Customers still want a physical electronics store: Gooch's departure is a "golden opportunity" for a new leader with vision, says Laura Heller at Forbes. With 4,700 stores nationwide, RadioShack has "tremendous geographical reach." And with its strong focus on smartphones, "there has to be a way for RadioShack to succeed in a market where small, mobile devices are rapidly becoming the most purchased and used consumer products in the world." Shoppers are "hungry for a place close to home they can physically visit," and a "friendly neighborhood technology store would fill that gap." 


No. RadioShack's smartphone strategy won't succeed: Sure, smartphones are booming and RadioShack wins points for offering a "variety of devices from the major carriers," says Rick Aristotle Munarriz at The Motley Fool. But it's not easy to make money in the long term as a third-party distributor. "It's the wireless carrier that establishes a direct relationship with the customers," which means RadioShack is "really just a retailer of wings, applauding as its patrons fly away with their purchases." Customers "may come in for replacement charging cords and accessories, but it's ultimately a cesspool of crummy margins."


And investors are jumping ship: "There's a stirring scene in the movie Titanic in which passengers on the lowest decks of the ill-fated liner are following the rats as they scurry to higher ground to escape the rising flood," says Marc Bastow at InvestorPlace. Reminiscent of that scene: The exodus of panicked shareholders from RadioShack. The company's share price has dropped a painful 73% this year alone, cutting its valuation to a quarter of what it once was. "Life jackets, anyone?" 


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