Or is RadioShack There Already?

Is RadioShack Destined for Irrelevancy?

Will Deener

wwrdeener@aol.com

Published: 12 August 2012 09:11 PM

I did something the other day that I’m reasonably sure most of you haven’t done in a long time, perhaps in years.

I visited a RadioShack store.

Not only that, I even purchased a packet of AAA batteries. I didn’t need the batteries, but the sales clerk seemed so melancholy and yet eager to help me — the lone

customer in the store — that making a small purchase seemed the least I could do.

My visit to RadioShack was a sort of fact-finding mission — as in what the hell happened here? A few days before my visit I had read with interest the company’s

dismal second-quarter earnings release.

RadioShack Corp. is pumping red like a ruptured artery. The Fort Worth-based electronics retailer posted a loss of $21 million in the quarter, compared with a profit of

about $25 million in the same quarter last year, and this was on top of an $8 million loss in the first quarter.

And if that weren’t bad enough, it announced it was suspending its dividend payout. Not surprisingly, the stock was clocked, closing down 30 percent in one day.

RadioShack shareholders have lost about 80 percent of their investment over the past year as this old retailing warhorse seems destined for irrelevancy, if not outright

bankruptcy.

This pains me because one of my fondest memories as a young boy was my father taking me to RadioShack and buying me a remote-controlled car — the best of

times.

Iconic companies

In recent years, several iconic American companies seem to have lost their way, including Sears Holdings Corp., Eastman Kodak Co. and now RadioShack. A retail

analyst I contacted before my visit to RadioShack told me the flaw that these companies all share is that they adapted too slowly to their competitors and to a

changing retail environment.

Sears underestimated its competitors and from at least 2007 to 2009 drastically reduced spending on upgrading its stores. They look tired, they look old, and most of

them are in shabby malls. People stopped going.

“If you leave your stores like that for a few years, Target is going to come in and say ‘I can pick off a really dirty-looking Sears,’” said Paul Swinand, a retail analyst at

Morningstar. “And it did.”

Kodak, which is in bankruptcy protection, foolishly resisted the move to digital cameras long after it was obvious to everyone that film was becoming irrelevant.

“Kodak tried everything it could to keep film relevant, but the writing was on the wall with digital cameras and digital phones,” said Michael Lewis, a retail analyst for

The Motley Fool. “There was no reason for people to buy film, and yet Kodak made no effort to get into the digital business until it was too late.”

Kodak shares now trade around 30 cents — what a monument to stubbornness.

As for RadioShack, when I strolled through the aisles of that store on my recent visit, I couldn’t help but think how spot on was Lewis’ description of the company.

“RadioShack sells things that we don’t buy at RadioShack anymore,” he said.

How true. I could have purchased the batteries at Wal-Mart or Tom Thumb, and any electronic gadgets, such as a universal remote, could have been bought on

Amazon.com or Wal-Mart cheaper and more conveniently.

 

To its credit, the company tried about two years ago to stop the bleeding by offering to sell a few Apple products, such as the iPhone and iPad. In fact, the stock got a

nice pop when this was announced, but a Forbes magazine headline captured this strategy just perfectly: “RadioShack’s iPhone Strategy Is Working Well: What a

Disaster.”

The problem is that profit margins on iPhones are razor-thin, which erodes the bottom line. Additionally, Lewis said that customers looking to buy Apple products

simply don’t think of RadioShack as the place to do it.

“A customer’s first thought is that ‘I will go to an Apple store, or I will order it online,’” Lewis said. “It feels good to be in an Apple store, but RadioShack is a depressing

place to be.”

Well, I don’t know that I agree with that, but my experience in the store was something short of exciting. As I was about to leave, I asked the sales clerk if his store

sold iPads.

“Yes sir, we do,” he said, pointing to a poster of an iPad hanging on the wall.

“Well, OK, can I see it?” I asked. He responded: “We don’t actually have them in this store. I would have to call another store and get one.”

That’s OK, I said. Maybe I’ll come back later. But I worry that RadioShack, which has been around for more than 90 years, may not be there.