Please ensure Javascript is enabled for purposes of website accessibility

1 Down, 499 RadioShacks to Go

By Rick Munarriz – Feb 5, 2014 at 9:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fresh off a Super Bowl ad victory, RadioShack may be scaling back.

A lot of companies are claiming that they were the ultimate victor among Super Bowl advertisers over the weekend, but it's hard to top RadioShack (RSHCQ) if we go by Wall Street's reaction.

The small-box retailer of consumer electronics saw its shares trade nearly 12% higher at one point on Monday -- eventually settling to close 3% higher as the general market tanked -- fueled by excitement over its self-effacing ad that owns up to the market's perception of RadioShack as a tired and dated concept.

"The '80s called," a RadioShack clerk tells a co-worker. "They want their store back."

It's at that point that a horde of '80s icons including Hulk Hogan, Alf, and the California Raisins gut the store of its merchandise, shelving, and decor as Loverboy's "Working for the Weekend" plays. We then cut to the store's more stylish concept layout of today, which probably surprised most Super Bowl viewers, many of whom hadn't stepped inside a RadioShack in years.

The ad was memorable and effective, but acknowledging that your best days were in the past obviously doesn't guarantee relevance in the future. RadioShack still has a problem, and it may want to lean on Hulk Hogan's lifting skills in the near future.

After all, it may not be just the store in the commercial that gets cleared of its stock and fixtures. 

Folks "familiar with the matter" are telling The Wall Street Journal that RadioShack plans to close roughly 500 stores this year. That's a big number, even for a huge chain with 4,300 locations in operation. 

RadioShack is clearly struggling. It has yet to post its holiday-quarter results, but the third quarter was a disaster. RadioShack posted a large deficit as an 8.4% plunge in comps sent sales the wrong way.

Things aren't going to get any easier. Analysts see the losses continuing on an annual basis until 2017 at the earliest. Despite the clever commercial, the smart money has to be on RadioShack going away before it can turn the corner. 

RadioShack realizes that folks aren't buying small consumer electronics gadgetry through brick-and-mortar stores the way that they used to. RadioShack's push to become a hub for wireless phones hasn't panned out. Between the migration to digitally delivered media and the lower prices available online, there doesn't seem to be any viable model in which RadioShack can grow. 

The concept stores that it's been rolling out emphasize entertainment gadgets requiring a little education and hand-holding, but the addressable market for that format may not be enough to justify RadioShack's thousands of stores in strip malls across the country.

It may not seem right, but images of Mary Lou Retton, Child's Play Chuckie, and Twisted Sister's Dee Snider tearing a store apart aren't glimpses of the past. If the chatter is true, those '80s icons have 499 more stores to gut in the coming months -- and probably thousands more in the coming years.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

RS Legacy Corporation Stock Quote
RS Legacy Corporation
RSHCQ

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.