The struggling American franchise of electronics retail
) is planning to close 1,100 unprofitable outlets after the
company reported dismal numbers for the eighth consecutive
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.
After shutting down nearly 20% its outlets the company's
operating expenses are expected to reduce. However, until the
comparable store sales improve, a drastic turnaround in its
business is impossible. RadioShack is facing stiff competition
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. Consequently, the rising
trend of shopping through tablets and smartphones is lowering
profits of the retail industry.
In the recently concluded quarter, the company's top and
bottom line missed the respective Zacks Consensus Estimate. More
importantly, the company's comparable store sales for the
operated stores and kiosks (stores and kiosks that have been
operational for at least a year) declined 19%.
This is a key retail performance indicator measuring growth
from the existing sales locations. Free cash flow, in the
reported period, was a negative $6.5 million against $110.8
million in the prior-year quarter. Thus, the shutting down of
stores is expected to increase cash flow and improve margins
RadioShack currently has a Zacks Rank #3 (Hold).
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