Radio Shack dying a slow death, but a sure death

Courtesy Markets-Commentary
By Al Geriglio

I thought RadioShack was pretty much dead in 2006.

CEO David Edmondson resigned that year as he faced trial for his third drunken-driving arrest. He was also under fire after the Fort Worth Star-Telegram reported that he’d lied about a college degree on his resume and corporate biography.

RadioShack (NYSE:RSH)  then replaced Edmondson with that genius of turnaround geniuses, Julian Day, who had been chief executive of that great turnaround story, um, Kmart.

For all his failings, Day did deliver at least one information-age innovation: He was the first CEO of a major company to use email to inform 400 employees that they were laid off.

“The work force reduction notification is currently in progress,” the email read. “Unfortunately, your position is one that has been eliminated.”

Nothing inspires store associates more than efficiency such as this. But by this point, RadioShack stock had already fallen from about $75 a share in 1999 to about $18.
It seemed like RadioShack faced impending death then, but looking back now it’s clear the retailer was still in its golden era. RadioShack stock now trades for less than a pack of batteries at $2.50.

Day deployed his losing turnaround strategies for five years. In 2009, for instance, he rebranded RadioShack as “The Shack.” This was the same year its competitor, Circuit City, went out of business. I thought RadioShack was done then, too. Who wants to shop in a shack?

In January 2011, I wrote column, headlined “RadioShack still just a shack,” pinpointing exactly what was wrong with the retailer, and still remains wrong today.
“RadioShack’s problem is that nobody knows what it is,” I wrote. “Is it the 7-Eleven of electronics retailers? Is it just another strip-center shop selling mobile phones? Or is it … a place for all your radio-controlled toy car needs?”

Day could not answer these questions. He resigned in May 2011.

His successor, Jim Gooch, also a former Kmart executive, couldn’t answer them either. Gooch lasted about 16 months — long enough to watch the company’s stock lose about three quarters of the value it had already plunged to before he got the big turnaround job.

And just when I thought RadioShack was dead for sure, it replaced Gooch with Joseph Magnacca — its fourth chief executive officer in three years.

Magnacca joined RadioShack from Walgreen Co. (NYSE:WAG)  where he was executive vice president over marketing and merchandising efforts for more than 8,000 stores. He has quickly learned that it is a lot easier to sell drugs, candy bars, hygiene products, sundries and six-packs of beer than mobile phones and their accessories.
On Tuesday, he announced a fourth quarter loss of $191.4 million, a 20% drop in fourth quarter revenues, and plans to close 1,100 stores.
Was anybody surprised?

This was a company that actually paid for a Super Bowl commercial poking fun at itself: “The ‘80s called: They want their store back.” Watch the commercial.

It was a memorable commercial, but it likely just cemented consumer perceptions of a retailer that will never be able to compete with Amazon  or Wal-Mart  in its niche category.

The store closings will leave RadioShack with 4,000 locations that they can eventually give back to the 1980s — but not yet. Cutbacks and refinancings mean there’s plenty time left to tell turnaround stories before this peg-legged has-been of a retailer finally falls over and dies.

“We’re really dialing up the experience in our stores and differentiating ourselves from big-box retailers,” Magnacca said in a conference call with investors on Tuesday.
He touted “the power of our people.” You go into a RadioShack store and someone there will guide you through the maze of confusing choices that is modern consumer technology.

Those people have to live in perpetual fear of store closings and job losses, and they’re supposed to knowledgeably put customer first?


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