Radio Shack - "Why You Should Stick To Your Knitting"

[W1UJR]

Radio Shack to close stores
CEO vows changes after weak quarter

RadioShack Corp.'s troubles deepened yesterday, as the electronics retailer announced it would close up to 10 percent of its 7,000 stores after a report of weak fourth-quarter earnings.

At an investment conference at RadioShack's Fort Worth, Texas, headquarters, where the news was released, president and chief executive David Edmondson apologized to investors over "misstatements" on his resume.

Edmondson vowed to reverse the company's fortunes with an 18-month turnaround plan to slash costs and replace slow-moving goods with hot sellers.

Though there is wide agreement that RadioShack needs a turnaround plan, it is unclear if Edmondson, embroiled in personal controversy, will be able to lead it.

For his part, Edmondson projected confidence despite his own travails, first disclosed in newspaper reports earlier this week.

"What we now realize is that we must move in a more bold, aggressive manner and with a greater degree of urgency and speed," he told investors and analysts at the annual event. But investors dumped the stock yesterday. The share price dropped by $1.67 to $19.08, an 8 percent plunge.

Wall Street analysts sounded dire warnings about RadioShack's future.

"RadioShack's results, and more importantly the guidance for next year on cash flow, point to a company in a virtual state of collapse," wrote Gary Balter, an analyst with Credit Suisse Group, in a report yesterday.

For the quarter, RadioShack's net income fell 62 percent to $49.5 million, or 36 cents per share, from $130.9 million, or 81 cents per share, in the year-earlier period. Sales rose 4.9 percent to $1.67 billion.

For the full year, net income fell to $265.3 million, or $1.78 per share, down from $337.2 million, or $2.08 per share, in 2004.

Sales rose 5 percent to $5.08 billion.

One culprit behind the fall in fourth-quarter profits was a $62 million inventory writedown. RadioShack also attributed the decline to sluggish sales of profitable items such as wireless-related products.

RadioShack plans to close 400 to 700 stores at a cost of as much as $90 million.

Top executives will be meeting with regional managers in the coming weeks to decide which stores to close, said Claire Babrowski, executive vice president and chief operating officer.

In addition, RadioShack said it would close two distribution centers, one in Mississippi and one in South Carolina.

The disappointing financial results capped a week in which RadioShack's board of directors said it would hire an independent counsel to investigate Edmondson's portrayal of his academic credentials.

On Wednesday, Edmondson admitted that his resume contained "erroneous information" after a report by The Fort Worth Star-Telegram questioned whether he had received a college degree.

Edmondson has maintained that he received a theology degree from an unaccredited California institution called Pacific Coast Baptist Bible College, which later relocated to Oklahoma and renamed itself Heartland Baptist Bible College.

Edmondson apologized in a statement Wednesday evening and again during the session yesterday.

In a subsequent conference call with reporters, a RadioShack official cut off questioning about the controversy after reporters grilled Edmondson on his ethics.

Edmondson is awaiting trial in April on a driving while intoxicated charge.

[W3SLK]

Certainly not the same Radio Shack Bill Halligan started years ago, (I thought it was Bill). ER did a neat little bigraphy about it some years ago.

[W3SLK]

I stand corrected. A mind is a terrible thing when its wasted!
(or something like that)

The First RadioShack Store
Two years later and half a continent away, two brothers, Theodore and Milton Deutschmann, opened a one-store retail and mail-order operation in the heart of downtown Boston. They chose the name, "RadioShack," which was a term for the small, wooden structure that housed a ship's radio equipment. The Deutschmanns thought the name was appropriate for a store that would supply the needs of radio officers aboard ships, as well as "ham" radio operators.

http://www.radioshackcorporation.com/about/history.html

[W1UJR]

Certainly not the same Radio Shack Bill Halligan started years ago, (I thought it was Bill). ER did a neat little bigraphy about it some years ago.

Not sure if it was Bill.

No, they lost their niche in a vey bad way.
Instead of selling radio and electronic items and parts they have chosen to sell the disposal plastic junk from China and go head to head with Wal-Wart, Best Buy and Circuit City.
A losing idea to be sure, wonder who reviewed that biz plan, must have been on Wal-Wart’s payroll!
Few get rich selling cell phones, too much of a cut throat market, just like most consumer plastic electronic junk.
Razor thin margins and massive market coverage are the norm.

Now Radio Shack has driven away the very core of their business, the electronics hobbyist.
Most of the parts are blister packed in metal bins, away from public display.
Likewise most of the parts are cheap junk from China and the sales force is clueless.
Not that they are bad folks, the company has simply not made training in that area a priority.

>Insert your favorite Radio Shack sake droid joke or experience here.<

Radio Shack stock bought me my first car in 1981, a 1970 Mustang with a 351C engine.
I would be very leery of buying any now, at least until things hit bottom.

With the store closings, looks like we have many more "missing teeth" in the nasty strip malls.
I think RS is well on the way to joining great names which have become history - Henry, Harrison Radio, Burnstein-Applebee....

Keep the faith!

[W1DAN]

Hi Bruce and all:

I knew this would happen.

RS wanted to sell big ticket items like computers and cell phones. Only they tried to compete with the large Best-Buy, etc. RS could never bring the product prices down to really compete with them.

The downsizing of the electronic parts was the beginning...they thought they could not make enough on a resistor pack.

When the started the phrase "you have questions, we have answers" told me alot about it's future. Kinda like my company's 401K and medical booklets getting color and glossy while offering less at more money.

It was fun while it lasted...

73
Dan
W1DAN

[Steve - WB3HUZ]

You got questions, we got batteries.

[Pete, WA2CWA]

Like a lot of retail stores, Radio Shack has to worry about it's bottom line and not customer's memories of days gone by.

[k4kyv]

About a week ago I went to our nearest Radio Shack to buy a cable splitter, to hook up an old TV that has separate twin-lead terminals for VHF and UHF to cable.  I found what I wanted, plus 6' of coax with type F connectors on each end.  The total bill was about $16.  They rang it up, and I pulled out a pocket full of quarters to pay for it (didn't have any paper change, and didn't want to use plastic).

They WOULD NOT TAKE my quarters for payment.  Said something like not having any room in their cash register for that much change.

That is the first time in my life (63 years) that I had ever seen anyone refuse payment with coins.

[John Holotko]

Years ago I remember buying a toggle switch for one of my rigs from Radio Crack. Within a year it was no longer functional. I bought another from Radio Crack and it lasted but 6 months and fell apart on me. Finally I ordered the same switch from a reputable  electronics supplier. I could tell immediatly  the switch was much better made than the flimsy Radio Crack switch. It's still in service over a decade later and going strong.

More recently I bought a replacement battery for a UPS on a single server at home.  6 months later I noticed the system went dead during a momentary outage. The UPS had failed to do it's  job. Normally a UPS batter  shouldlast 1-2  years. The Radio crack battery failed after 6 months.

Similar experiences have made me disgusted to the point where I have been avoiding Radio Crack for years. And this Cristmas they didn;t  even have the toy RC plane in stock that they advertized in their holiday circular.

To heck with Ratty Shack,  these  days I order from online suppliers, Saves the headaches of dealing with radio crack.

[WA1GFZ]

I stayed in a fancy joint across the street from R.S. H.Q. in Fort Worth a few years ago. I really wanted to walk in and see how the big shots live. Also see if they were really as stupid as their products. I only go in there as a last resort. They are only good for DB15 and DB25 connectors. Also those nice metal backshells

[Glenn NY4NC]

 

You got questions.... we got cell phones!

You got questions, we got batteries.

[K1MVP]

Like a lot of retail stores, Radio Shack has to worry about it's bottom line and not customer's memories of days gone by.

Pete,
Yep,--R/shack has been "going downhill" for some a while,--from by "looking" at
the "quality" or "lack of quality" over the past few years, and the reduction
of components, in stock.
No longer catering to the builder and just "pushing" the the "plastic stuff".
Hmmm, seems like a "trend" with many "organizations", including those related
directly to ham radio,IMO.
"Downsizing"--also seems the "trend' with many,--is the ARRL next?

                                         73, K1MVP
r

[Art]

Radio Shack is operating under a failing business model. The electronics parts business was high margin but relatively slow moving. The cellphone, audio, and computer accessories business puts them in a low margin, highly competitive environment in which they are poorly positioned compared to Best Buy and Circuit City. It isn't a surprise their stock is tanking. . . . did quite well on the short side recently so really can't complain.
They need new leadership at the helm and product lines to get them back on top. Right now an emphasis on iPod accessories might keep them from penny stock land for a while.

-ap

[W1UJR]

Radio Shack is operating under a failing business model. The electronics parts business was high margin but relatively slow moving. The cellphone, audio, and computer accessories business puts them in a low margin, highly competitive environment in which they are poorly positioned compared to Best Buy and Circuit City. It isn't a surprise their stock is tanking. . . . did quite well on the short side recently so really can't complain.
They need new leadership at the helm and product lines to get them back on top. Right now an emphasis on iPod accessories might keep them from penny stock land for a while.

-ap

Interesting comment, I noticed the local RS store had stocked up on exactly that, Ipod stuff.
Trouble is you can buy that, and cheaper with better selection, at the big chains.

Not sure what the answer is for RS, its sad to see an icon go under.
I just don't see a viable biz model out there for them, the big boxes are eating thier lunch.
RS has done little to differeniate itself from the big boxes.
Some informed service would be a good value added selling point, but that has never been RS's strong suit.

Glad you did OK selling short, think its a long downhill slide with the snowball getting bigger and bigger on the way down.
Will we ever build things in America again?

-1UJR

[WA1GFZ]

well, the real problem is noboby buys electronic parts anymore except for a few hams.
There is no demand so they have stopped selling the stuff. Their choice of products has not filled the void. They have to compete with the big box stores and their junk.

[W1DAN]

Hi all:

Some very good comments here.

I agree that few people buy electronic components nowadays. So, it's OK that they are dropping the parts stock (or they could have the stuff in the back room so they do not use up valuable store space on it). They made good money on it. Especially recently!

I am not living in the past with them and I have already gone to mailorder for my parts years ago.

To survive, RS needs either one of two things:

1) sell the same stuff places like Best Buy, etc cheaper or at the same price with value added sales knowledge (that left 20 years ago!). or...

2) sell something that no one else sells.

How to do this, I do not know.

I'll start collecting their catalogs and remember "the good ol' days"!

73
Dan
W1DAN

[Pete, WA2CWA]

Down-sizing of retail stores is happening in many arenas. Office Supply stores are also being hit.
Here's the latest list of Office Max retail store areas that are/or will be soon available for lease, and more are coming.

http://www.officemaxrealestate.com/ExcessRealEstate/Index.aspx?StateID=0

[Art]

Yet Staples is doing well . . . they are diversified and competing less with Computer City, etc. and have a good sense of small business needs.
I think retail requires dedication to a clientelle. Nordys doesn't have problems selling their wares. Home Depot, Lowes, solid companies doing well in todays business environment.
Bruce . . .  Wyerhouser, and GP for a couple of good US companies. PG, KMB, BUD, WFMI, WAG, when the fed overtightening slows the economy too much . . . say . .  about mid 2006 . . .
 I see good folks at GM being laid off . . . the same folks who worked for GM when it was making money. The fish is rotten at the head first . . .  then we get into the cost of benefits and labor . . . eg. I have heard that $1500 of each GM vehicle goes to benefits . . . that's OK if the end product is world class . . . but GM ain't . . .  TM is eating their lunch and guess what. . . US workers are making Toyotas . . . prolly folks who used to work at GM . . . however, TM won't allow workers to go home and still pay them and other rather rediculous labor arrangements . . . guess what, TM cost of benefits is significantly less . . .

-ap