) sells consumer electronics goods and services through its
RadioShack chain of stores and competes with retailers like
Wal-Mart (NYSE:WMT), Target (
) and Best Buy (
). The seven broad categories of products it sells are: wireless,
accessory, modern home, personal electronics, power, technical,
service and others. Of these, wireless is a major segment for
RadioShack and contributes approximately 48% to its net revenues.
The key to RadioShack's growth is whether it can maintain revenue
growth by optimizing its product mix based on consumer trends.
Coverage Launch; $18.30 Price Estimate for
We recently launched coverage on RadioShack with a
$18.30 price estimate for the company's stock
. RadioShack's company operated stores are located in strip centers
and major shopping malls as well as individual storefronts, and it
operates manufacturing facilities in the United States and
We break down our analysis of RadioShack into the three main
business segments below:
1. US RadioShack Stores
Consumer Electronics Industry at a Glance
Driven by product innovations and new services, the consumer
electronics industry has experienced impressive growth rates over
the past several years. In particular, the mobile phone industry
has driven much of this growth due to the rising demand for
smartphones and increase use of mobile devices.
According to the Consumer Electronics Association (
), sales of consumer electronics should remain strong growing by
more than 3% in 2011 to $186 billion due to the continued adoption
of more portable digital products. In 2011, the CEA estimates that
smartphone revenues will increase nearly 20% to more than $21
RadioShack's ability to tap this demand will help it grow its
revenues per square foot in its stores while growing its online and
kiosk sales channels.
U.S. Sales Presence
RadioShack depends primarily on its 4,486 company-operated stores
under the RadioShack brand in the U.S, Puerto Rico and the U.S.
Virgin Islands. It also operates 1,267 kiosks located
throughout the U.S. located inside Target and Sam's Club
The company has a network of over 1,200 dealer outlets,
including 34 located outside of North
America. Internationally, it has 211 company-operated stores
under the RadioShack brand, nine dealers, and one distribution
center in Mexico. It also caters to customers through its
commercial website www.radioshack.com.
Drivers to U.S. Stores Division
If you look at the key forecasts to our U.S. Stores driver: 1)
revenue per square foot, 2) number of stores, 3) average square
footage, and 4) gross profit margin, we forecast the last 3
forecasts to remain more or less stable through our forecast period
indicating that the key driver for the company is increasing
revenue per square foot.
RadioShack expects total net sales and operating revenues to
increase in the low to mid single digit percent range in 2011,
primarily driven by continued growth in the wireless product
platform, and its ability to execute will determine the ability to
driver this division which is near 85% of the company's stock value
by our analysis.
See our complete analysis for RadioShack