RadioShack to close up to 700 stores

Reuters ^ | 2/17/06

[iPod Shuffle]

RadioShack to close up to 700 stores

Fri Feb 17, 2006 1:16 PM ET

By Nicole Maestri

NEW YORK (Reuters) - RadioShack Corp. (RSH.N: Quote, Profile, Research), whose chief executive has admitted to lying on his resume, on Friday said quarterly profit fell 62 percent after a switch in wireless providers led to an inventory write-down, sending its shares to a nearly three-year low.

The consumer electronics retailer, which said it was hiring legal counsel to investigate the admission by CEO David Edmondson, also announced a new turnaround plan that includes closing 400 to 700 company-operated stores and liquidating slow-moving inventory.

The company said it was "unwise" to issue earnings forecasts for 2006 given the uncertainty of the turnaround plan, which could cost up to $100 million.

"We have been very cautious on (RadioShack's) ability to execute the wireless transition smoothly and are skeptical on the just-announced turnaround," Lehman Bros. analyst Alan Rifkin said in a note. "We would not be owners of (the) shares at this time."

RadioShack shares were down $1.61, or 7.8 percent, at $19.14 in afternoon New York Stock Exchange trading after touching as low as $19.02.

FALLING EARNINGS

Fourth-quarter earnings fell to $49.5 million, or 36 cents per share, from $130.9 million, or 81 cents per share, a year earlier.

According to Reuters Estimates, excluding 22 cents per share for the inventory write-down and a 2-cent charge for an accounting change, profit would have been 60 cents, which compares with the analysts' average forecast of 66 cents.

Sales rose 5 percent to $1.67 billion, compared with analysts' target of $1.62 billion.

The results come two days after Edmondson admitted that he lied about his academic record on his resume and on the company's Web site. The discrepancy was first reported earlier this week by the Fort Worth Star-Telegram.

At an investor conference, Edmondson began by apologizing for any embarrassment the situation caused and said the issue was now in the hands of the board.

As for the quarterly results, Edmondson said sales were "good" in low-margin nonwireless categories like MP3 players, but were weak in high-margin categories, like batteries. Sales of wireless products, a key profit driver, were below targets.

Last year, RadioShack said it would switch phone carrier partners to try to revive its wireless sales. It agreed to sell Cingular Wireless phones and cut ties with long-time ally Verizon Wireless. It also signed a new 11-year deal with Sprint Nextel Corp. (S.N: Quote, Profile, Research).

But the transition, which took place at the end of the year, turned out to be more difficult than expected.

On Friday, RadioShack said it took an inventory write-down of $62 million in the quarter, and it is replacing old, slower-moving merchandise like speaker wire and outdoor antennas with new, faster-moving items

"Our business model for many years has been based on high- margin, slow-moving products," Edmondson said during an investor presentation. "These products are taking up valuable space in the store that can be much more efficiently utilized."

RadioShack said it would liquidate some products, take "aggressive" mark-downs on others and let some stay on store shelves until they sell out. It will continue to sell some of the products on its Web site, though not in the stores.

The company also expects to add about 200 kiosks in 2006, relocate some stores to better sites, and close two distribution centers.

RadioShack, which has 7,000 company-owned and dealer stores, estimated it would incur costs of $55 million to $100 million on the inventory write-downs and store closures in 2006, although it may take some of the costs in 2007, depending on when it closes the stores.

"While the execution of the turnaround plan will trigger the recognition of significant costs," Edmondson said, "we are confident that the steps we are taking will put RadioShack back on the track to sustained profitable growth."

[Howlin]

I always liked having to give them my name, address, and phone number to buy a battery.

Heck, I have to do that to buy a box of Tylenol Sinus now.

[johnny7]

Radio Shack motto...

“We got something close to what you want... but it won't work“

[ArmstedFragg]

I think Heathkit is available.

Or Lafayette Electronics.

[em2vn]

Price, product and service sell. The name is of little consequence.

[Bloody Sam Roberts]

Don't I know it.
I go there once per week and always buy something...whether I need it or not. A roll of wire, whatever. I think of it as a small insurance premium for the future.

[capt. norm]

I remember when RS was the only electronics store.

I guess electronic hobbies are becoming obsolete. Radio Shack and Heathkit were my two favorite sources. Many a weekend I was up overnight(s) soldering and assembling projects and enjoying it to the max. It seemed like "soldering adrenaline" was much more powerful than the caffeine in coffee.

Now it's hard to find kits anymore.

[Willie Green]

When did the CEO admit his wrongdoing. The last story I read, he was claiming that the school had lost his records.

Excerpted from CEO puts RadioShack in bind

Late Wednesday, Edmondson accepted responsibility for inaccuracies in the academic history listed on his résumé and corporate biography a day after a Star-Telegram investigation revealed the discrepancies.
He said he believes he earned a three-year Th.G. degree in theology from Pacific Coast Baptist College, not a bachelor's degree as listed on his résumé but said he cannot document that he received the degree. The school's records reflect that he only attended for two semesters.
RadioShack's board, which issued a vote of confidence in Edmondson on Tuesday, said late Wednesday it would retain legal counsel to investigate the matter and advise the board on the company's employment policies. It gave no indication how long that would take.

[dfwgator]

I remember when RS was the only electronics store.

I remember how eagerly I used to anticipate them coming out with new shortwave radio models. I still have my DX-370 I bought 15 years ago and it still works great.

[Calvin Locke]

A couple of years ago, I followed a link from the alt.radio-shack newgroup to a website run by a disgruntled
former employee of the rat shack.

Those policies from from HQ and make life hell for the store employees. HQ would send people around to verify that
employees would ask each customer if they wanted to buy a cell phone. Can't remember any other stuff.

My odd story is when they were changing vendors of shortwave radios, they were closing out the Sangeans and bringing in the Grundigs.

I had previously bought a reduced priced DX-402 about a month earlier, and saw that they dropped to $50 in the
shortwave newsgroup. So I went to buy another one for a Christmas present. The clerk was ticked that I would not
buy the extended warranty.

There are two stores that are "convenient", and a third that's a bit more of a drive. And they don't all
necessarily carry the same deals, so I'll stop in just to check the closeouts, and whatever else I need.

[N. Theknow]

Yeah.. for me, it was always "Morry Lipschiz, PO Box 1, Reno, Nevada"

My address was 1947 Hugoyor Way, Olgamein, Kansas

[Hunble]

I remember when RS was the only electronics store.

At the age of 51, RadioShack was always my first source for electronics. When they created the TRS-80 computer, I purchased on. At one time, RadioShack was THE source for computer hardware.

If I needed an electrical switch, resistor or other electronic parts, RadioShack was my first choice.

Sadly, today's RadioShack stores are poor imitations of Wal-Mart, and they have forgotten their roots.

[PAR35]

Thanks. So he couldn't make his attempt to blame others work. Sounds like he got a solid Christian education at that school. /sarcasm.

[Warhammer]

I worked for Radio Shack over a summer about 15 years ago. I learned a lot.

1) Most of their profits were, at the time, from "add-on" sales (Would you like batteries with that?)

2) RS pushed their credit cards (RSVP card) so that they don't have to pay the fees from Master Card, VISA, etc. My manager told us to strongly suggest another card than American Express (they charged the store 4% instead of 1.95% like everyone else). RS also had a quota that X% (I want to say 4%) of your sales had to be from RS credit cards.

Don't know if I ever sold any RSVPs. I thought that people should be able to use the cards of their choice, so why push one of ours on them?

3) RS pushed their extended warranties by a carrot and stick approach. As an employee I was given an additional 10% bonus on every TSP (service plan) that I sold, so I would make 16.75% on each one! I also had to get X% (I think 2% in this case) of my sales from TSPs. There was talk about taking the bonus away from these.

The TSPs were a joke on everything but the computers. For example on a $39.99 phone, you could buy a TSP that extended your warranty from 90 days to 3 yrs and would give you walk-up replacement with no questions (at least at my store) for $29.99! On a $1500.00 computer they would be $299.00 for the same coverage, which was still pretty stiff.

I never could sell a TSP because I thought (and still do) that they were ripoffs and I couldn't honestly recommend them.

4) RS paid their employees on strict commission each week. I made 6.75% comission on all of my sales for the week, or minimum wage for my time there, whichever was higher. So next time you go in to get batteries and the salesperson tries to sell you a TV you know why.

5) The "training" that you got in order to get "certified" for a certain type of product consisted of learning material and taking a test. The materials for computer certification were written for ignorant 19-year olds off of the street and were a joke. Didn't work there long enough to look at the other certifications.

6) We had to take phone number stuff back then too. Supposedly was to aid with returns, but was actually to fill out the mailing list.

It was a hard thing to work for RS. I was consistently ranked between 15th and 19th in sales for the Northwestern Houston area for the three months I was there but had I not lived at home, I would not have been able to support myself. I would like to hope that things are better, but I doubt it.

[Denver Ditdat]

You beat me to it. Mouser is an excellent component vendor.

For vintage stuff, I like Antique Electronic Supply

[operation clinton cleanup]

It seemed like "soldering adrenaline" was much more powerful than the caffeine in coffee.

I always loved the smell of solder... but then again Testors plastic model cement also had a sweet smell...

[TXnMA]

Radio Shaft?

Sounds right to me.

Moonlighted there one time, and management kept talking about all the money we'd make come Christmastime. When that time came, Tandy cut our (already meager) commission percentages -- because "It's so easy to sell at Christmastime"...

[operation clinton cleanup]

I never did the shortwave thing (due to lack of funds), but used the catalog to build many ultimate stereo systems.... on paper.

[dfwgator]

I spent many of a childhood day playing with their 100 in 1 electric kits.

[Denver Ditdat]

Now it's hard to find kits anymore.

There are still some fantastic kit manufacturers out there, though most specialize in ham radio gear rather than general electronics. Give these a try:

Elecraft
Small Wonder Labs
Oak Hills Research
Emtech
Milestone Technologies
Ramsey Electronics
Ten-Tec Kits
Wilderness Radio

Kitbuilding is still alive and well!

[Willie Green]

Thanks. So he couldn't make his attempt to blame others work. Sounds like he got a solid Christian education at that school.

You're welcome.
I gotta admit, I'm disappointed that much of the chit-chat on this thread has ignored this bozo's lack of qualifications.
As an engineer and do-it-yourself tinkerer, I've always valued RadioShack as a place where you can find assorted items not found elsewhere. But over the years, they've deemphesized the products that appeal to hobbyists and cluttered the stores with crap that you can find at any discount store. Hopefully, somebody will get them back to basics after this guy gets the boot.