Fort Worth, Tex. - RadioShack has begun carrying Apple’s iPod line and is adding 8-foot-long merchandising displays into its mall-based stores to support the product line.
In a conference call reporting its third quarter financials, CFO David Barnes said earnings were impacted by an aggressive clearance sale that resulted in a $14 million write-down. Despite the clearance event, which began in September and continues this month, RadioShack reported higher inventory levels year-over-year due to slower sales; the increased number of kiosks it is operating; the greater amount of wireless product it must carry as the chain transitions from Verizon to Cingular on Jan. 1; and a larger fourth quarter build up than last year.
Barnes said gains in wireless due to brisk sales at kiosk locations and more favorable terms for handset sales under a new agreement with Sprint were countered by three factors:
Lower average selling prices due to the lack of new handset features or technologies;
The absence this quarter of sales incentive bonuses from RadioShack’s wireless carriers;
Increasing consumer preference for pre-paid plans, which deliver lower margins to RadioShack.
Looking ahead to the holiday selling season, president/CEO Dave Edmondson said the company will focus on four “hot categories” to drive traffic and accessory sales: satellite radio, MP3 players, wireless, and digital imaging.
Sales efforts will be supported by a new ad campaign that will break next month, plus the implementation of new, more efficient store operating procedures that match labor to traffic patterns. The new procedures have so far yielded higher conversion rates, Edmondson said.
Elsewhere, the company continues to convert its store base to its newest retail format, with 17 percent of locations currently retrofitted. RadioShack is also cutting SKUs, reducing clutter, and is promoting more major brands at its mall-based stores, where sales continue to trail the chain's off-mall locations.