RadioShack to shutter 20 percent of its stores

Discussion
Mar 05, 2014

When Joe Magnacca took over as CEO of RadioShack just over a year ago, the odds were against him getting the business turned around. With the announcement yesterday that RadioShack will close up to 1,100 stores — roughly 20 percent of its total — it’s clear that Mr. Magnacca and company have a long way to go in accomplishing their goals.

"Our fourth quarter financial results were driven by a holiday season characterized by lower store traffic, intense promotional activity particularly in consumer electronics, a very soft mobility marketplace and a few operational issues," said Mr. Magnacca, in a statement, "Even in this environment, we’re continuing to make progress on the five pillars of our turnaround plan: repositioning the brand, revamping the product assortment, reinvigorating the stores, operational efficiency and financial flexibility."

RadioShack’s total net revenues for the latest quarter were $935.4 million, down from $1,171.4 million the year before. Comparable store sales were down 19 percent.

Mr. Magnacca explained the decision to close stores. "Our focus on the brand, our operations, and the in-store experience has been unfolding in parallel with a strategic review of our store footprint," he said. "Over the past few months, we have undertaken a comprehensive review of our portfolio from many angles — location, area demographics, lease life and financial performance — in order to consolidate our store base into fewer locations while maintaining a strong presence in each market."

The picture isn’t all gloomy, said Mr. Magnacca. He pointed to new RadioShack Concept Stores, billed as electronics playgrounds for consumers, that have achieved positive sales growth. The company, he said, has also gotten high marks for its "Do It Together" brand message that kicked off around the Super Bowl. Those steps along with key hires will help the chain get to where it needs to be.

Many, understandably, do not share the RadioShack CEO’s positive outlook.

Analyst Michael Pachter at Wedbush Securities, told USA Today, "I think they won’t be in business in a year. I think that they are doing everything right — they’re just doing it 10 years too late."

What is your assessment of RadioShack following the announcement it will close roughly 20 percent of its stores? Is it too late for RadioShack or can they turn things around?

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22 Comments on "RadioShack to shutter 20 percent of its stores"

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Dave Wendland
BrainTrust

There’s good news and bad news for RadioShack.

The good news: 1) Closing underperforming locations is an essential first step. 2) Reinventing the in-store experience is a good second step (although very costly). 3) Repositioning the brand is paramount.

The bad news: 1) There are likely another group of underperformers that will need to be shuttered. 2) The transformation needs to occur yesterday to have a chance of taking hold. 3) Will the positioning resonate with shoppers, or is it too late?

Chris Petersen, PhD.
BrainTrust

What Michael Pachter said … “they are doing things right they’re just doing it 10 years too late.” Closing underperforming retail stores should be an on-going process, not an event driven by financial crisis. There was a very telling comment in the RadioShack 4th Quarter Summary – “The company expects to close up to 1,100 stores … The proposed store closure program is subject to the consent of our lenders under the 2018 Credit Agreement.”

There are two other key metrics that foretell RadioShack’s pending doom:

1. It is impossible to be profitable on low margin tech products when you only achieve 4 inventory turns per year.

2. Store traffic is down by almost 20% YoY. What are RadioShack’s value props that will bring them back in the store?

Adrian Weidmann
BrainTrust

I would agree with Mr. Pachter’s assessment that RadioShack may be doing all the right things now but they’re doing all 10-15 years too late. As a do-it-yourselfer, I was once a consistent RadioShack customer. The most annoying practice that drove me away was EVERY time I would purchase an item, they asked for my mailing address and the only thing I was rewarded with was another barrage of meaningless mailings! As the world and customer expectations changed, RadioShack just kept doing the same thing they had done for years and now they’re paying the price. I would be surprised if RadioShack is around in 2 years.

Tony Orlando
BrainTrust

I think unless they really change, they’ll be gone. The culture of consumer electronics has changed over the years, and RadioShack at one time was IT, but the disco days are over too. With online dominating this category, it will be tough to keep RadioShack around.

Phil Rubin
BrainTrust
2 years 6 months ago

RadioShack needs to pursue more than a “strategic review of [its] store footprint” – they need to explore strategic alternatives. Michael Practer at Wedbush had it generally right when he told USA Today that he thinks “…they won’t be in business in a year” and that “…they are doing everything right — they’re just doing it 10 years too late.” His latter comment might be generous.

Steve Montgomery
BrainTrust

There is nothing that indicates that closing 20% of the stores is “doing it right.” Bad stores eat up far too much time, resources, and company focus.

It is very likely that those stores should have been closed long before. It is difficult for any publicly traded company to go to the market with a story that involves closing stores. I give him credit for taking this step.

Cathy Hotka
BrainTrust

While RadioShack is probably smart to close these stores, Job One has to be re-energizing the brand. What’s the compelling reason for consumers to enter the store? What new merchandise is there? What makes RadioShack different from Best Buy or Tiger Direct or Amazon? These should be management’s focus every morning, noon and night.

Mordecai Rosen
Guest
Mordecai Rosen
2 years 6 months ago

Too late! I know the one in my neighborhood is used for emergencies only.

Jeff Hall
BrainTrust

With comparable store sales down 20%, RadioShack is a brand in crisis mode, and it may very well be too late for a turnaround. While the new “electronics playground” concept store may represent some of the more innovative thinking to come out of the company in years, the challenge is that many other consumer electronics retailers are looking to reposition themselves in a similar manner.

James Tenser
BrainTrust

A necessary step, even if taken under duress from the bankers. RadioShack could be an attractive target for certain acquirers after some cleanup. Imagine an instant chain of service-oriented shops run by Microsoft Surface or Google Android to support customer success with their platforms.

Then again, I’m still infatuated with the notion of an Amazon Kindle acquisition. Imagine a.Shack, backed by the Amazon endless aisle, and serving as 4,000 same day delivery nodes.

Nancy Cobb
Guest
Nancy Cobb
2 years 6 months ago

I went to RadioShack two weeks ago looking for a simple cable and they did not have what I needed. Employees were not helpful. Came home and ordered what I needed on Amazon…it was delivered promptly with free shipping.

In order for stores to survive these days, they must hire quality, energetic, knowledgeable staff. I can’t imagine the store in my neighborhood surviving.

Peter Charness
BrainTrust

I think they are in a really tough spot in terms of the very basic “why would I go to RadioShack” (and spend a good chunk of money). They are really fenced in by bigger players in virtually all of their categories (online and brick and mortar). Then again, 5 years ago I would have said the same thing in terms of what is the relevancy of a RadioShack store.

Ed Rosenbaum
BrainTrust

What a disappointing article to read. RadioShack has been a staple in the market for many years. From reading this, the future is bleak. I have friends working for them at Corporate that I am concerned for right now.

Closing 20% of their store inventory is massive. This is after a huge layoff not that many years ago. It seems late in the game to find out what others have surmised for years.

I have to go now. I want to call my friend there to see how he is doing with the news.

Raymond D. Jones
Guest
Raymond D. Jones
2 years 6 months ago

RadioShack is struggling to find relevance in the 21st century retail world. They have major issues and their survival is definitely in question. They say they are focused on the brand. The RadioShack brand is too tied to the past. They need to update it, even change it. They need to become The Tech Center or something similar.

Furthermore, they need to have a positioning as the place for something. Right now, they are an afterthought.

Importantly, they are extremely vulnerable to competition from web based stores. They need to provide something beside just products. Knowledge, skills, a better experience.

Right now, RadioShack is like the old time local hardware store, a fond memory, but fading fast.

gordon arnold
Guest
2 years 6 months ago

Losing 90+ stores per month with no plan to turn it around is not a passing grade from any supportable perspective. It is now time to review any of the buyout or merger offers on the table. If that has evaporated with the repair efforts, then they should be soliciting for real offers. What a mess!

Craig Sundstrom
Guest

You can’t “close ‘underperforming’ stores” your way to success when ALL your stores are underperforming. I wish them well, but when they’re battling Kmart/Sears and JCP for the title of “most doomed retailer,” it’s hard to be optimistic.

Kate Blake
Guest
Kate Blake
2 years 6 months ago

Yes, it’s too late. Too much attitude and bad service has happened at RadioShack that I don’t ever need to shop there again.

Anne Bieler
Guest
Anne Bieler
2 years 6 months ago

RadioShack is at the tipping point – time to tightly focus and move on where it makes sense. Hard to understand exactly where they fit and the compelling reason to shop there. Some good locations and tech hungry shoppers looking for the smaller items you need every day, maybe it will work.

Lee Peterson
BrainTrust

Re: 1,100 stores closing: is that all?

Also, what we’re not hearing is about their e-commerce. How’s that going? Their entire inventory, it would seem, is surely much more conducive to buying online. In which case, you’d obviously need way fewer stores than the 4,500 they’ve got left.

Jerry Gelsomino
BrainTrust

How many years has RetailWire been in existence? How many times have we talked about RadioShack and Sears? The problems still exist; the people, location designs, and overall customer experience at these stores is not good. The customer has to work too hard to shop in these stores. The business strategy must be overhauled. Sorry for those who are losing their jobs, but with fewer stores, maybe the company can re-look at their focus.

Alan Cooper
Guest
Alan Cooper
2 years 6 months ago

For years, RS was the “go to” place for cables, connectors, analog telephones, small bulbs, capacitors, etc., all of which you couldn’t find in one location, such as Walmart or Target. Not to mention “cool” radio frequency-controlled cars. Now Home Depot and Lowe’s carry a vast selection of cables and connectors, soldering irons, etc. Mobile phone carrier stores have substantially better customer service. Warehouse clubs and office supply stores are a better bet for cordless phones and electronic gadgets.

Technology has made the old RS obsolete and I agree that they are 10 years too late with change. Plus, many consumers find it easier to click on Amazon or eBay.

michael bigley
Guest
michael bigley
2 years 6 months ago
I don’t think it matters how many underperforming stores they close, this is the path of Circuit City. I actually think shuttering stores will hasten their demise. RadioShack’s roots are in makers of a past generation. The staff were also knowledgable in the language of electronic tinkerers. Today there is a new generation of makers emerging well beyond the Ham radio geeks. Dumping the crap that can be bought–probably cheaper– at the big box stores and returning to their roots of providing materials and components for makers is perhaps their only path to salvation. I would also use the floorspace currently used by displaying crap to have a maker demo area and invest in some of the larger 3D printers that are unaffordable by most and “rent” the printing of objects vis-a-vis Kinkos. While this would have been a great build off of their Super Bowl commercial, it’s still not too late to make the brand cool again. Cool again to the same genre of people who built the original brand, not necessarily to the mass audience they have tried for years to attract. Probably they could employ some of that original generation, who are now retirees, as part-time knowledgeable… Read more »
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