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Nothing Can Save RadioShack Now

By Rich Duprey - Mar 5, 2014 at 4:31PM

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Where once there was hope, the choices the electronics retailer has made confirms it's all over.

Its fate is sealed. The decision to close 1,100 stores and rebuild the remaining ones around some tech-centric concept featuring interactive displays means RadioShack (NYSE: RSH) has thrown in the towel, run out of ideas, and essentially given up even the pretense of trying. It's done. Finished. Kaput.

Whatever hope there had been for resurrecting the once-cool -- in a geeky sort of way -- brand from the dustbin of history of other failed electronics retailers, it gave up the ghost when it settled on the tried-but-failed concept of clearing out the clutter and featuring even more prominently the mobile phone cart it's hitched its wagon to but that thus far has only led to pain and misery. And a $2.25-per-share stock price.

RadioShack seems unalterably wedded to the notion that it can be a new, smaller Best Buy ( BBY 1.88% ), which itself underwent dramatic transformations necessitated by a changing retail landscape. Everybody and their brother thought mobile phones were the quick path to profits, but it's a marketplace saturated with outlets where there can only really be a few winners, and not even Best Buy is really succeeding there anymore.

In its fourth-quarter earnings announcement, the electronics superstore reported its gross profits were squeezed from a heavily promotional environment to get customers to even come in the door. But Best Buy has also suffered as a result of a new mobile warranty program it introduced last quarter that sucked 35 basis points from its margins while lower attach rates to its service plans took it down another notch or two.

RadioShack wasn't even that fortunate, as its own same-store sales plunged 19% driven primarily from a lack of customers wanting its mobile phone offerings. So now it thinks that by displaying them even more prominently -- they already took up the main focus of the store as soon as you walked into one -- and allowing customers to play with them, it will drive sales.

When department store operator J.C. Penney ran into trouble, it thought getting rid of clothing racks and throwing in random bits of technology would do the trick, too. Sales only got worse. Kohl's is now following that playbook precisely, thinking adding electronic price signs will give it a touch of gee-whiz feel. Things aren't looking up for it, either.

Source: Wikimedia Commons.

In the years before its demise, Circuit City also sought the supposedly greener pastures of cellphones and technology. Its investment in DivX, a competing technology to plain DVDs that amounted to being a single-use disk (someone actually thought that was a winning business model?), ended up draining hundreds of millions of dollars from the company before it finally abandoned it. Circuit City, of course, eventually went bankrupt.

By trying to become just another electronics store, RadioShack is ensuring it will follow a long line of similar failed ventures including Circuit City, Sixth Avenue Electronics, Nobody Beats the Wiz, Topps Appliance City, and Crazy Eddie. hhgregg and Conn's are barely able to keep it together these days.

I've already said that the one thing RadioShack can do to turn things around, to make itself the leader once again and the go-to place for technology for the do-it-yourself electronics geek, is to revisit its roots and simultaneously capitalize on the nascent maker revolution: 3-D printing and cutting-edge technology as represented by Arduino microcontrollers and Raspberry Pi minicomputers. This is where the real future of tech lies. Not only do the 1980s want their store back, the 1990s and 2000s want to repossess it, too.

Unfortunately, RadioShack's chosen to bitterly cling to a failed past, one that's already proven its ability to bankrupt businesses that thought they could be different. They can't and RadioShack's not. This is the end, as it's chosen a path from which no one can save it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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