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RadioShack Ends RCA Pact, Refines Assortment

1/20/2004 02:27:00 PM Eastern

Fort Worth, Texas - RadioShack will be deploying 'disproportionate amounts of resources' to six core product categories this year —mobile phones, digital imaging, power products, broadband/connectivity, gifts/toys, and wellness — as it continues to refine and rethink its merchandise mix, the company said.

The retailer revealed its strategic initiatives to analysts during a two-day institutional investor conference held here at corporate headquarters earlier this month.

As part of the process, the company said it would not renew its five-year-old A/V alliance with Thomson, although it will continue to carry RCA branded home entertainment products. The pact, which ends this spring, made RCA the retailer’s exclusive A/V brand and created in-store RCA shops in over 4,000 company-owned RadioShack locations.

Ending the Thompson alliance also dovetails with RadioShack’s decision to drop DirecTV in order to focus on selling DISH Network service. The move is expected to have a neutral-to-slightly positive impact on its satellite business, the company said.

In stores, the approximately 18-foot-long walls currently occupied by the RCA Digital Entertainment Centers will be re-merchandised, with about 10 feet devoted to a broader assortment of home entertainment products and brands, and the balance used for higher-margin categories like personal electronics, accessories and power products.

RadioShack will also expand its assortment of wellness and novelty products, based on its success with LifeWise air purifiers and ZipZaps micro R/C cars.

Separately, the company reported that total fourth quarter sales slipped 1 percent to $1.5 billion while same-store sales also slid 1 percent.

Chairman/CEO Len Roberts attributed the flat results to light traffic and inclement weather. Wireless communications was a key revenue driver during the period, he reported, with brisk sales of Verizon and Sprint products and services, and wireless accessories, boosting the category 17 percent year-over-year.

That gain was offset by an 18 percent decline in sales of wired communications due to reduced demand for telephones and accessories, and a 15 percent drop in home entertainment volume due to lower sales of satellite systems, A/V products, and accessories, the company said.

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