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RadioShack Sees Riches In Exploiting New Niches

TWICE: RadioShack is a company in transition. Has the renewed focus on your core accessories, parts and battery businesses helped cushion you during the retail downturn?

Dave Edmondson (Radio Shack): I think transition is the right word. This was a year of transitioning from what we have been to what we want to be.

I recently spoke with a number of our officers and I said, “We need to understand that our strategy is not to have a limited selection of everything in consumer electronics at higher prices because of our cost structure.” We have to have a different set of directions in terms of what we do. We are not trying to sell plasma TV. We will try to stay out of the fray and not get to the place where you have DVDs hanging on the wall in blister packs. That is not our business.

I think you will see us occupying some unique niches by the time we get to next year. I think this year you will see a lot more innovative products like the little RC car we sold, which was a huge success. We probably could have sold 4 million more if we had them.

If you look at how we performed, some of the businesses we exited in 2001 were a drag on earnings, but we did not get quite as close to the number of things that we needed to replace them with as we would have liked. If we had been a little faster in bringing some of these niche things to market, we would have had a very different outlook.

Most of those things are within our control. But this will not be an easy year. We will have to grind it out one yard at a time. You focus on what you want to be, the niche you want to occupy, continually getting better at those things and not trying to be all things to all people. The good news for us looking to the future is that if we lean into what we are famous for then we lean into things that are margin and profit enhancing. I am cautiously optimistic about the future but extremely pessimistic about where the consumer is going to be for big-ticket items. I think people are trading down.

TWICE: Were there any surprises as you pursued your strategy?

Edmondson: We had a couple. During 2002, the whole satellite industry craziness was a surprise and it still befuddles me that the average selling price of direct-to-home has gone through the floor. The manufactured cost of the box certainly has not had a commensurate change to it.

Also, the nature of wireless has clearly changed. We moved from the win-win situation we have been in up until now to the first year of a win-lose situation. If you took the number of new subscribers generated and spread them across the base of the six major carriers, there were not enough new subscribers for everybody to win. So somebody will win, somebody will lose, and that was the first year that that has taken place. Many people are loyal not so much to their carrier, but to their phone number.