The struggling American franchise of electronics retail
), is planning to close nearly 500 stores -- 10% of its
Earlier, RadioShack undertook 5 strategies to restructure its
business model which include redefining the brand, revamping
product assortment, reinvigorating stores, achieving operational
efficiency and attaining financial flexibility.
The company's decision to shut underperforming stores is part
of its strategy to bring the company back on the growth track.
However, we believe that it will be difficult for the company to
turn around its business because of competition emanating from
retail giants like
Best Buy Co., Inc.
RadioShack's core Consumer Electronics retail business is on a
secular downtrend. Nowadays, consumers prefer making online
purchases to visiting retail stores. The rising trend of shopping
through tablets and smartphones is lowering profits of the retail
RadioShack posted weak third-quarter 2013 financial results.
Notably, the comparable store sales for the company-operated
stores and kiosks (stores and kiosks that have been operational
for at least a year) were down 8.4% in the reported quarter.
This is a key retail performance indicator measuring growth
from the existing sales locations.In the third quarter, the
company had $149 million free cash flow against a negative $12.1
million in the prior-year period. So the closure of stores will
further increase the clash flow and will improve margins in the
upcoming quarter. RadioShack is scheduled to report its
fourth-quarter results later this month.
RadioShack currently has a Zacks Rank #3 (Hold).
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