By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Fort Worth, Texas – RadioShack plans to refresh its brand, assortment and stores to attract a new, younger customer and reverse a string of successive quarterly losses.
The strategy, which is still evolving, was outlined in broad strokes by recently installed CEO Joseph Magnacca during a first-quarter earnings call this morning, after the struggling chain announced a $43 million loss for the period.
Magnacca joined RadioShack in February from Walgreens and said he spent the ensuing weeks assessing the chain and solidifying its new management team.
He said the most immediate change will be a new branding campaign under the theme “Let’s Play” that positions RadioShack as a neighborhood technology playground. The tagline will be highlighted in network TV spots, newspaper inserts and social and digital media, beginning with a new Beats commercial that airs next week.
Inside the store, expect to find a renewed focus on private-label brands and products, which differentiate RadioShack from its competitors and provide higher margins. Magnacca said his merchants are currently rationalizing the assortment and that the fruits of a recent product development foray in China will hit stores this summer.
The stores themselves will undergo a refresh, beginning in New York over the next several weeks. The remodeling program leverages the stores’ existing fixtures and footprints to keep capital expenditures low, and will include more interactive demos and “power brand” displays that group products by brand rather than category.
By way of example, Magnacca noted that Apple products are presently dispersed throughout the store by product classification rather than presented in a central Apple area, making it more difficult for customers to find what they’re looking for.
Sales staff will also be reinstructed to sell “the whole store” rather than aggressively focus on mobile phone sales, as they had previously been directed, which some customers found off-putting.
There are no plans for wholesale closures of stores, Magnacca noted, although redundant locations may be shuttered as leases expire. The chain shut 104 company-operated stores last year, but the new management team is considering using its over 4,000 locations as mini fulfillment centers for online orders as it moves to bolster multichannel sales.
Magnacca also said he met with key vendors who are “encouraged” by the initiatives.
Investors, who’ve similarly listened to a litany of strategic initiatives under six CEOs over the last eight years, may be giving the latest another chance, as RadioShack’s share price rose nearly 5 percent to $3.29 after the earnings call.
In a research note, Janney retail analyst David Strasser blamed the chain’s woes on “a long list of top management that sold out the long term for near term profits,” and said that based on his remerchandising track record at Walgreens’ New York-area drugstore chain Duane Reade, “listening and giving Mr. Magnacca the benefit of the doubt, here, could prove worthwhile.”
Still, Strasser described the company’s first quarter results as “a disaster by any stretch of the imagination,” as losses widened to $43 million from a year-ago net loss of $8 million. Chief financial officer and former interim CEO Dorvin Lively attributed the red ink largely to the company’s postpaid mobile business. Handset unit volume fell 25 percent year over year amid reduced promotional activity, constrained inventory on popular models and a dearth of “iconic” introductions, he said on the earnings call, while RadioShack’s exit from its failed mobile department program for Target accounted for $8.5 million of the loss.
In contrast, prepaid mobile sales were up double-digit during the quarter as the addition of premium models helped remove any stigma from the category, and the wireless accessories and Bluetooth speaker categories also showed particular strength.
In contrast, CE, laptop and MP3 player sales were weak but enjoyed margin rate improvement, Lively said.
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