RadioShack Restructures

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Fort Worth, Texas - RadioShack is dropping categories, closing stores and selling its headquarters in an effort to boost profitability.

The measures, for which the CE chain will take a $124 million charge in its fiscal fourth quarter, are designed to 'strengthen the quality of its assets and enhance return on investment,' RadioShack said.

As part of the plan, the company will exit the 'non-strategic' car stereo, pager, security system and commercial electronics parts categories in order to concentrate on its core accessories, batteries, parts and wireless businesses. RadioShack is also abandoning the commercial installation business, which proved unprofitable for the retailer, and will focus instead on the residential market.

RadioShack is also closing 35 under-performing stores, and, in a break from the company's usual business practice, will do so prior to the expiration of their leases.

The No. 5 CE chain is also selling the Charles D. Tandy Center, its corporate headquarters here. RadioShack will leaseback the office space until 2004, when it will move into a new headquarters facility that's also located in downtown Fort Worth. The move is expected to 'reduce operating efficiencies, improve earnings and substantially enhance workplace efficiency,' the company said.

Charges will include a $45 million loss on the sale of its headquarters, $26 million to exit the various product categories, $8 million to shut the stores and $5 million to leave the commercial installation business.

Chief financial officer Michael Newman said the cash impact of the write-off is less than $10 million, and that the actions will 'better align the company's assets with operations and merchandise initiatives in order to execute its anchor growth strategy in 2002 and beyond.'

In a research note, UBS Warburg managing director Aram Rubinson observed that 'Though charges are never pretty, we are pleased to see [RadioShack] progress in their repositioning strategy. The relatively new CFO continues to make a positive and meaningful impact.'


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