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RadioShack Pursuing Three-Point Plan For Profitable Growth

5/08/2012 12:01:00 AM Eastern

FORT WORTH, TEXAS – RadioShack
is pursuing a three-pronged
merchandising, marketing and expansion
strategy to put the national CE
chain back on a profitable growth track.

President/CEO Jim Gooch and
CFO Dorvin Lively detailed the plan to
investors last month after announcing
an $8 million first-quarter loss.

The roadmap includes a renewed
focus on the mobile and accessories
categories, a new marketing campaign
to highlight the chain’s broad wireless
assortment, and new ventures and
partnerships both domestically and
abroad.

Mobile remains the company’s fastest-
growing business, Lively said on
a conference call, but its profitability
has been impacted by a sales mix shift
to iPhone and lower than expected
gross profit margins from the 1,490
Target mobile departments it operates
for the discount chain.

RadioShack and Target are addressing
the problem through changes
in the operating model, such as adjusting
department hours and product
assortment on a per store basis, Lively
said, while Gooch praised iPhone’s
high unit growth which drives traffic
and attach rates for margin-rich accessories.

Lively noted that the company’s prepaid
business is still struggling following
the departure of T-Mobile last year,
and that it will take more time to make
consumers aware of Verizon’s availability
through the chain.

RadioShack plans to herald its wireless
offering in a new creative campaign
being developed by recentlyhired
Grey Advertising that will launch
in the second half of the year.

The company will also build on its
accessories business – which accounts
for 50 percent of gross margin
dollars – by expanding and enhancing
product assortments, including headphones;
optimizing pricing and marketing
programs; improving in-store
execution; and retooling its privatelabel
products.

Under the price-optimization plan,
select items will be priced “much
more competitively” to project a value
image, while prices on other SKUs will
rise, Lively said.

The company also said it will enhance
training for sales associates,
and will continue to pursue new ventures
such as its recently announced
master franchise agreement with Malaysia’s
Berjaya Corp. for 1,000 stores
in 10 Southeast Asian countries over
the next decade.

Lively added that top-line growth
from RadioShack’s mobile, accessories
and private-label businesses, together
with greater cost efficiencies,
should stabilize its margin structure.

Net sales and operating revenues
slipped 0.9 percent to $1 billion during
the quarter, ended March 31, while
sales at company-owned U.S. stores
fell 6.9 percent, partially offset by the
addition of 610 Target departments.
Comp-store sales, which include the
Target results, decreased 4.2 percent.

The comp declines reflected lower
sales of Sprint postpaid wireless
plans, prepaid wireless handsets, laptops,
and home entertainment accessories,
the company reported.

Broken out by category, mobility
sales at company-operated stores decreased
5.2 percent during the quarter
due to lower postpaid wireless
sales from Sprint following changes
in the carrier’s early upgrade program.

Accessory sales increased 0.7 percent
at company-owned U.S. stores,
driven by higher sales of tablet accessories,
headphones, wireless accessories
and service agreements.

Sales of CE, which includes digital
music players, computers and peripherals,
cameras, landline phones, home
audio and TVs, decreased 24.1 percent
due to “ongoing difficult industry
trends in these product categories,”
the company said.

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