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R’Shack Expanding Gaming, GPS Assortments

2/29/2008 03:55:00 PM Eastern

Fort Worth, Texas – In a major shift in its merchandising strategy, RadioShack will expand its gaming, GPS and private label assortments this year while limiting its flat panel business to opportunistic buys.

After testing the category during the second half of 2007, the chain said it will roll out gaming products to over 4,000 stores by year’s end and will have a “core assortment” of products in over half of those locations. The assortment will include private label accessories and game consoles “as inventory becomes available,” said chief merchandising officer Peter Whitsett during a conference call earlier this week, and will occupy 40 percent to 50 percent more floor space. Chairman/CEO Julian Day told analysts that last year some vendors, unsure of RadioShack’s commitment to the category, were initially reluctant to allocate inventory that was already in short supply. Now, he said, “We are confident that we can get access to any product set we need.”

The chain is also looking to expand its assortment of GPS devices after the category enjoyed “strong” triple-digit growth during the fourth quarter, said CFO Jim Gooch.

The company will also beef up its private label line of Gigaware branded MP3 and gaming accessories, while lowering acquisition costs through global sourcing initiatives such as competitive auctions, accelerated line reviews, and strategic supplier partnerships, Whitsett said.

By contrast, RadioShack will reduce its flat panel TV business, which accounted for 20 percent of last quarter’s overall sales decline. Whitsett attributed the poor results to “issues with the assortment… the number of stores that it went in, as well as kind of the logistics of handling that size of a unit through our supply chain.” Going forward, the company will limit its flat panel presence to competitively priced “in-and-out” SKUs by Tier 1 and Tier 2 vendors that it will use to attach HD-related accessories, he said.

Day added that RadioShack is “working very hard to fix” its Sprint wireless business, which accounted for 80 percent of last quarter’s sales decline. Bryan Bevan, the company’s recently named store operations executive VP, said RadioShack is partnering closely with the wireless provider and has “an opportunity” to exceed its overall marketplace performance. Gooch added that recent gains in its AT&T post-paid wireless business will offset any softness in the Sprint program.

No significant changes in store count are planned, although the stores themselves will be “de-cluttered” and redesigned for improved self-navigation and an enhanced wireless wall, Bevan said.

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