Maybe We Should Just Call it "Radio Ramshackle"

I've been predicting the demise of RadioShack (NYSE: RSH  ) for a few years now. Four years ago, it was one of four stocks that I thought might be seeing its last Christmas, yet it has managed to hang on despite the collapse of movie rental chain Blockbuster, and bookstore Borders. (The fourth stock I felt was doomed, Sears Holdings, also is managing to cling to life.)

Late last year, I reiterated that, while bankruptcy might not be in the cards for RadioShack, there was serious doubt about its future, and trying to remain relevant, let alone solvent, by betting everything on smartphone sales suggested investors would do well to eschew investing in the electronic doodads seller.

News yesterday that The Shack was hiring a financial advisor to fix its balance sheet problems seems to validate my view that whatever else was in store for the retailer, growth and financial security wasn't one of them.

Like Best Buy (NYSE: BBY  ) , which also went all-in on cellphones to prop up declining flat-screen TV sales, the brick-and-mortar retail business model seems doomed. That's why Best Buy Mobile stores average around 1,500 square feet compared to the 38,000 square feet of the electronics superstore,  and why they helped offset the 2.2% drop in revenues it experienced last year after closing down a number of its big-box stores.

RadioShack, which doesn't operate superstores on the scale of Best Buy, also tried the smaller-is-better routine to save money. It opened kiosks inside Target stores, but failed miserably, and the companies have since parted ways. Interestingly, Target also partnered with Best Buy to have their Geek Squad on hand, but that was a disaster, too, and was also killed.

The real-estate-lite model of Amazon.com has been the bane of big-box retailers everywhere. It might not be able to escape the sales tax any longer but, at this point, it doesn't need to, as it has achieved such scale that it can still effectively compete against retailers with a physical presence with aplomb.

And that's what's worrisome for RadioShack. It might have sufficient liquidity still, as it was quick to point out -- which helped restore much of the value it lost as investors made a pell-mell dash to the exits yesterday -- but even the need for a financial advisor points to the very weakness in its foundation.

As my colleague Steve Symington noted yesterday, RadioShack's abysmal performance lately has been exacerbated by having to write down failed initiatives like the $8.5 million Target debacle.

Unfortunately, as I've noted in the past, The Shack keeps trying new things hoping something will stick, like its joint venture with Cybermart to open stores in China, and one with Berjaya Retail Berhad to open stores in Malaysia. It eventually wants to have such partnerships to expand its footprint globally into 39 countries. The electronics retailer really needs to focus on its core operations here before launching such grandiose ideas worldwide.

Yesterday's news might not be the death knell for RadioShack yet, but it is heralding the end at last, and I still think investors in the electronics shop will be soon wistfully remembering the dreams of Christmas past.

The coming demise of RadioShack is only the latest portent of the biggest paradigm shift in retail since mail order took off at the turn of the last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.


Read/Post Comments (3) | Recommend This Article (1)

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  • Report this Comment On July 12, 2013, at 10:56 PM, neamakri wrote:

    "The electronics retailer really needs to focus on its core operations"

    Excuse me, what exactly are its core operations?

    I'm no genius but all I see are cell phone residuals keeping RSH alive. Their "core operations" business model from ten years ago is completely obsolete.

    If cell phones are their money maker, then every store should have their front windows completely decked out so there is no guessing why they are in business.

    Okay, besides the above, here are four specific moves RSH could make.

    1.buy Sharper Image. 2.buy Brookstone 3.make a business arrangement with Segway to have (on consignment) a Segway for sale in every Radio Shack. 4.print a zillion Airline magazines to be on every seat on every U.S. airplane...you know the mags I mean: in the seat pocket in front of you!

    Now every Radio Shack store will have Sharper Image, Brookstone, and Segway products.

    A financial advisor can't do any of that for RSH. All he can do is juggle the books.

  • Report this Comment On July 14, 2013, at 12:27 AM, jedidan wrote:

    hey didn't radio Shark operate super stores a while back [Long while back} [something] universe now Frys in Sacramento

  • Report this Comment On July 15, 2013, at 1:14 PM, BenFE08 wrote:

    Actually, prior to Julian Day and Jim Gooch, RSH had a mixture of products, with cell phones being less than 50% and were doing fairly well. Once Day came on, tho, and changed that mixture to de-emphasize the non-cell phone aspects, the company started to go down hill and FAST. Day and Gooch virtually KILLED RSH and now they need to get their mojo back after getting rid of them. It's going to take going BACK to accessories and their own branding + massive sales experience in all product aspects to repair the damage that Day and Gooch did to the company.

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