In the last month or so, RadioShack (
) appears to have taken some steps in a bid to make a comeback in
the market. This hasn't come too soon as the company has been
struggling for a while now, and with a new CEO finally in place, it
is high time it started delivering results.
The overall thrust of RadioShack's initiatives is on re-branding
the chain and re-defining what it stands for. The company is making
an effort to go after the younger demographic and the
Do-It-Yourself (DIY) customer segment. The latter became
disenchanted with the company following the 2009 re-positioning
exercise by the chain and largely abandoned it.
RadioShack is making changes to the store inventory, appearance
and even signage. It is also airing commercials targeted
specifically at a younger audience. While it is too soon to gauge
the impact of these efforts, let's take a closer look at some of
See our full analysis for RadioShack
Headed To College
RadioShack has signed a five-year contract with a subsidiary of
the National Association of College Stores to install
RadioShack-branded fixtures in campus bookstores, which will be
stocked with some of its popular items. While it is an opportunity
for RadioShack to enter a non-traditional marketplace, bookstores
may benefit as well. Bookstores have been facing competition from
e-books and online shopping and cannot rely only on sales of books
anymore to make profits. Results from the University of Texas have
been encouraging with items like headphones and other accessories
The potential market size is 4,000 college bookstores.
RadioShack-branded shelves come in 4-foot to 12-foot wall sections,
or in a free-standing fixture option. The marketing of the idea to
campus stores is being handled by the Association.
Changes To Stores
The re-branding effort by RadioShack includes new advertising
campaigns, better in-store signage, interactive store displays and
products intended to attract a larger demographic of customers.
The company wants to get rid of "The Shack" signage, a
re-branding effort it made in 2009 in an attempt to modernize.
According to a company executive, people are more familiar with
RadioShack, so the company will gradually convert the signage back
to the original name.
RadioShack is also tinkering with the store inventory to target
a wider customer base. This is being done together with an
advertising campaign on television that's different from what
RadioShack is traditionally known for. It recently introduced the
Beats Pill Bluetooth speakers and the television commercial for it
was inspired by the music video for Robin Thicke's pop single
"Blurred Lines". It even featured the singer himself.
While advertising is one part, the company claims that it is
making considerable efforts in its human resources and operations
departments as well. Without it, the whole exercise may end up
being cosmetic in nature and fizzle out after generating an initial
Why RadioShack Needs Its Initiatives To Succeed
RadioShack has been reporting disappointing results for quite a
while. In the first quarter, its net loss stood at $43.3 million as
compared to a net loss of $8 million in Q1 2012. Gross profit
margins fell by 0.8% from last year to reach 39.7%. The decline in
gross margins occurred primarily as a result of lower gross
margins in the postpaid wireless business and in turn led to a net
loss. The company's focus on mobile, a part of its "The Shack"
exercise in 2009, has been really hurting the bottom-line because
of low margins and stiff market competition from bigger players
like Best Buy.
While we are still in a wait-and-watch mode to see how
RadioShack's efforts pan out, the company does deserve credit for
sticking to the promises made in the previous earnings conference
calls. If the efforts are successful, it should start being
reflected in results over the next couple of quarters.
We have a
Trefis price estimate of $3 for RadioShack
, which we will be revising shortly in view of the recent
a Company's Products Impact its Stock Price at Trefis