RadioShack Sets Plans As Losses Mount

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FORT WORTH, TEXAS — RadioShack reported a net loss of $98.3 million in its first quarter amid what it described as a soft market for CE and lackluster mobile demand.

The loss, covering the 13 weeks ended May 3, laps a year-ago net loss of $28 million.

Net sales sank 13 percent to $736.7 million and comp sales fell 14 percent, the company said, as traffic declined and mobile business weakened.

Despite the dour results, CEO Joe Magnacca continues to plug away at his multi-pronged turnaround plan for the iconic CE chain, recently adding an in-store repair service for cellphones and tablets and a partnership with PCH International to fast-track new product introductions.

On an earnings call, Magnacca said the new Fix It Here repair program makes RadioShack the first national chain to offer in-store repairs of mobile devices.

The program, which is limited to Apple and Samsung products, has been piloted in about 300 stores over the past few months and will be extended to an additional 400 locations by year’s end, he said. So far, stores with the service are outperforming the chain in sales and profit, and the offering is driving new traffic to those locations.

“Fix It Here has the potential to drive meaningful growth in our stores as we scale, and we can drive traffic with further marketing support,” he told analysts.

Internally, the chain has also launched a communications platform, RS Connect, for sales associates to access training and information on new products, promotions and critical company material. The platform was developed so that store staff can “be more efficient with their time and more effective with our customers,” Magnacca said.

Other elements of the turnaround plan include a chain-wide store update drawing elements from its successful concept showrooms; a new “Do It Together” marketing campaign; an assortment overhaul; and improved operational efficiencies.

The company has also cut costs, is lowering its corporate headcount and is reducing discretionary expenses, Magnacca said. RadioShack has also closed 22 stores this year and expects to shut as many as 200 more in lieu of plans, blocked by lenders, to close over a thousand underperforming and overlapping locations.

Nevertheless, gross profit slipped from 40.2 percent to 36.5 percent of net sales during the quarter, due mainly to “aggressive price competition” in pre- and post-paid handsets, Magnacca noted.

Analysts noted that the clock is ticking on the turnaround, as RadioShack admittedly has only about 12 months of operational liquidity — assuming improving sales and margin trends — before it must make further cost cuts, reduce expenditures and inventory, sell off non-productive assets and take on more debt.


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