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."

[Edit35]

I may be the exception but the products I've bought and recomended have worked fine.The store layout is awful, (especially inside malls) and they only carry a limited line of electronics.

The stores near me seem way behind the times, not to mention they don't have much of a selection in computers and software.

[Clinging Bitterly]

Heh. In the Ham community, at least in my neck of the woods, we've called it ripoff shack for decades. Or just sh*t shack.

But I used to go there and get a lot of parts for projects and they used to have most of what I needed, but lately they carry less and less. The other day my wife tripped over the power cable of her laptop (again) and it shattered the little receptacle for it that's mounted on the motherboard (again - and let me tell you it is a huge chore to strip an Acer laptop to the bones and put it back together, but I digress). The first time I was able to stick the connector back together with some super glue but this time it went into a million pieces so I needed a new part. Went to sh*t shack to get a new one and they carry like one size of those little coaxial power receptacles and of course it isn't the right one, so I had to get a different size and also change it's mate on the power supply cord. And that's usually the sort of thing I have to do when I have a project because, like most people, I work all day and those are the hours the local "real" electronics supply place is open.

So I don't know. Sounds like they are moving farther away from the hobbyist market and more to the appliance consumer market and that makes no sense to me. You can't swing a dead cat without hitting three other places that already have exactly the same things the shack wants to sell, and usually cheaper. In the end I expect they'll be shutting down more stores if that's the way they want to go.

[TChad]

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

I once wrote Radio Shack to complain about that. I liked the stores, and it bothered me that the company would institute such an annoying sales policy. They responded with a self-serving boilerplate letter explaining how the policy helped them better serve their customers. In addition, I was surprised to find that the letter granted me a sort of exemption. I was given the option to show the letter to Radio Shack's sales clerks instead of having to divulge my personal info. In other words, Radio Shack responded in a letter addressed to me by name at my correct address, to tell me that I was no longer obligated to give the company my name and address. Moreover, they actually expected me to carry that stupid letter around with me and produce it when I shopped at their stores.

I found another solution: shopping less often at Radio Shack.

[Wilhelm Tell]

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.

It is a shame it is no longer "mainstream" to build stuff and experiment. I guess RS will take that valuable space used for power supplies and components and make room for yet one more phone -- that will make the difference! As if people who buy components never buy audio equipment or other gadgets.

I don't see how RS will continue to compete if everyone else (WalMart) has the same items at a lower price. I recently went into a Radio Shack and half of the store was taken up in stuff for cell phones. And half of that space was not cell phones themselves -- just cheap stuff like vinyl cell phone covers, cheap headphones, etc. They are crazy if they think that 1/4 of the store dedicated to vinyl cellphone covers will somehow save the business.

[Wilhelm Tell]

Thanks! I never knew about Radio Daze. I clicked on the link and saw their blurb "Attention Ham Radio Operators! Premium 6146W's at a great price!" That brings back happy memories of a child who used to ride his bicycle to the local electronics store and buy parts. I appreciate miniturization but there is still something special about a power amplifier that uses tubes -- but then I'm biased!

[festus]

RadioShack is Americas Technology Store


And that explains what is wrong with America.......

[pepsionice]

What Wal-mart ought to do....is buy Radio Shack...and make it a corner of the store. Wal-mart has never done that well on electronics and it'd be nice to have a geeky guy standing there who could actually answer questions like I always find in Radio Shack. I personally think that Radio Shack has less than five years of business left. I can't see long term survival in their cards. Where they really profit is in small towns of 10-15,000 people...and they are the only electronics shop in town.

[Wilhelm Tell]

Something just occurred to me. A month or so I was in a Radio Shack buying some parts and I remarked to the clerk that this store has more parts than other Radio Shack stores I had been to. The clerk said that RS stores in malls would focus on consumer goods and not have many parts while RS stores not in malls would have more of a selection of parts. I thought that was kind of odd. In light of this story, I bet the RS store not at malls will sell components and stuff at closeout prices and many of these stores will then close, while the RS stores in malls will be cellphones wall-to-wall with the occasional stereo.

[Fabozz]

"I remember when RS was the only electronics store."

I can top that: I remember when RadioShack sold leatherworking kits.

[Denver Ditdat]

Electronics magazines are nearly extinct except for those from England.

Nuts and Volts Magazine is the last heir (IMO) of the "Radio Electronics/Popular Electronics" tradition. PE began to fade away when they decided to become a yet another "me too!" computer magazine in the great glut of carbon copy mags in the mid 80s. I kept buying "Poptronics", the last gasp of a combined PE/RE, even though they had been lame for a long time before the end. Ditto Wayne Green's "73" magazine, which used to be as thick as a catalog in the late 70s and early 80s and loaded with great reading. It really took a nose dive after he sold it off and then bought it back in the later 80s. Way too much rambling conspiracy, fad diet, miracle AIDS cure crap took over. I miss the old phone book sized issues of Byte, too, especially from the era when Robert Tinney did the covers and Leo Brodie provided cartoons.

Geez, I must be getting old!

[Fresh Wind]

but then I'm biased!

So are the tubes! (heh, heh)

[Nik Naym]

"you've got questions, well so do we"

[whd23]

Is that guy holding a "Teletypes for Dummies" book? I didn't realize how long the Dummies series has been around...

[Not_Who_U_Think]

I've got to comment on this topic since I worked there as a part-time sales clerk in the 70's and the 90's.

Back in the 70's the name/address thing made some sense, receipts were still hand-written and you could handle the small stuff as cash. They used the info for direct mailing of course, and I guess it was somebody's bright idea for targeting. It became a focal point of performance, since it helped the higher-ups, it was a major job performance metric.

When they put in the computers it got much worse. Every transaction had to be rung up, and putting CASH in the N/A box was good for about maybe two tickets a day. They would threaten to fire you if you didn't keep your name/addy up in the 90% range. You don't know how many people quit over that, and many times you'd just make up a name rather than piss somebody off... but they got wise to that too. I know of no other store that has ever had a corporate policy so obnoxious to their customers. It just made me cringe to sell anything... by the time I worked there in the 90's it was a blessing to get the rare person who wasn't at least a little aggravated about it, and I had several people blow up right in front of me.

I don't think they gave it up until mailing costs went too high, but it has scarred their corporate image forever.

[JABBERBONK]

Some of their home brand equipment is overpriced junk. Forget buying radio controlled toys there, they are overpriced junk. Their brand of batteries are underpowered overpriced junk. But worse of all their sales people are completely ignorant of their products. I remember before CD recorders came on the market , I asked a Radio Shack salesman if RS was going to carry the new CD recorders, he replied : " I don't thinks so because the laser beam in the CD-R is dangerous, because it has to be much stronger than the laser in cd player, because the laser in the CD-R must be strong enough to cut a groove in the CD"....nuff said.

[Khankrumthebulgar]

Supply Chain Management, no coherent strategy for today's consumer Market. Their management is living in the past and has not adapated to the current Retail climate. Take a look at Best Buy, Circuit City, or Conn's. They are doing a much better job of marketing to the consumer market.

I walked into one and they had nothing I would be interested in buying. I am typing on a keyboard of a PC I bought at best buy. In front of a monitor, multifunction Laser Printer/scanner/fax/copier.

I am surprised that they have lasted this long. A leaner, smarter company may emerge with a chance to compete and actually sell stuff customers really want.

[Eclectica]

I remember when RS was the only electronics store. As a teenager in the early 80's, it was like going in to a toy store!

There was another earlier store—mostly mail-order—located on Jericho Turnpike on Long Island, New York.

It had a name made from initials, something like "SJKWV". (Which I think stood for "Seven Jewish Korean War Veterans", or something like that.)

Even a friend who lived nearby at the time can't recall it, but I've got a steel-trap for trivia.

Any old-timers remember what store I'm talking about—in the 60s and 70s?

[backhoe]

located on Jericho Turnpike on Long Island, New York.

Lafayette Radio- used to buy mail-order parts from them.

The store next door to mine in the old, long-burned-down Brunswick Mall was a franchise of theirs when it started out circa 1969.

[ErnBatavia]

http://www.crazygideons.com/

[Jonah Hex]

My own recent Radio Trash story:

I'd visited my local Shack to buy an extension antenna for my hand-held scanner. While paying up, the clerk asked me who provides my cell-phone service. When I answered I use a Trac-phone, he turned up his nose and suggested I should switch to their phones.

I just stared at him for a few beats... then quietly suggested (using my dangerously quiet voice) he finish up the sale so I could leave. He rang me out very quickly without further harassment.

Mark one up for counter-intimidation. ;-)