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Can Dinosaur Radioshack Evolve?


Let's face it - it looks very much like Radioshack's (NYSE: RSH) days are numbered. The company is a reminder of a bygone age and, like Kodak, it seems to be going the way of the 8-track cassette, VHS and Myspace. Take note, Best Buy (NYSE: BBY).

But wait a minute. Pause that video. Radioshack is an American institution. Surely it has the ability to roll with the times. It built its reputation on doing just that back in the day. At what point did it fall off the rails?

Wise minds seem to think that it was about ten years ago, when big box companies like Best Buy came into the game with reduced prices and, later, the Geek Squad. Suddenly, the ability to buy computer components became less important to Joe Public because we no longer have to do anything by ourselves. When Meijer started selling electronic goods, the game was as good as over for Radioshack.

On Tuesday, RSH posted a first-quarter loss. The company has been surviving on cell phone subscriptions for a while now, and that is more-than-mildly humiliating for the one-time-giant. It's like Johnny Depp selling 21 Jump Street signed DVDs in the street. You do what you have to do to scrape by, but reputations don't repair easily. Shares are down 13% to $5.30.

"As we anticipated, the first quarter was extremely challenging," said President and Chief Executive Jim Gooch. "While our results were disappointing, we are working quickly to drive top line growth and expand margins."

The results were more than disappointing, with RSH reporting a loss of $8 million, or 8 cents per share. Even this time last year, the company reported a profit of $35.1 million, or 33 cents per share, and even then it was considered yesterday's news.

The tragedy is that Radioshack still has so much going for it. The customer service remains impeccable. Of course, the running gag is that the staff is grateful to see anyone in the store. They will literally beam when you walk in, and nothing is too much trouble. That's a little off the mark, as Radioshack staff have always been helpful souls.

The truth is that there is nothing fundamentally wrong with Radioshack besides the inability to recognize or at least evolve with the fact that the world has gotten lazy. Nobody wants a project anymore. The majority of people (though not all people) don't want to build a bad-ass stereo system piece by piece, carefully making sure that each and every lead will enhance not hinder the sound quality. People don't tinker with their car stereos anymore. No, what people do now is worry more about getting as many tracks (a technical term, as opposed to 'songs') onto their iPods and, in turn, hard drives. Convenience over quality is the order of the day.

So what should Radioshack do to roll with these times? We suggest a redesign. Make the public aware that the staff are every bit as helpful as the Apple (NASDAQ: AAPL) genius' or the BBY Geek Squad. Aesthetically, turn the stores into some sort of generic brand Apple store. Keep the components, but put them in the back room. De-clutter, meanwhile watching those prices.

Radioshack is a strong brand with an impressive history. But it needs to roll with the sloth if it is going to avoid disappearing with Kodak. And selling handsets like a street vendor just won't cut it.

Follow me @BCallwood.

Posted-In: Earnings News Retail Sales


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