Yesterday, RadioShack (NYSE:RSH) shares gained on word of its growth strategy. While the venerable electronics widget retailer has seen good fortunes lately (click here for a refresher on the company's second quarter), the press announcement seemed a bit light on the details.
The good news for investors was that the company raised its outlook, stating its belief that it can grow earnings by a very healthy 19% to 21% by 2005 and sales by 4% to 6%. RadioShack's press announcement indicated "reinvigorating its retail experience and capitalizing on new initiatives."
This includes transforming more stores to its new format, which focuses on its seven strongest category areas, specifically, "wireless, accessories, power, modern home, personal electronics, technical, and service." However, in the company's last conference call (transcript archived by Thomson StreetEvents), it said that while it's excited about its new store format, it has been a qualitative success as opposed to quantitative: "Customers have given our new format rave reviews but we believe the financial returns have not been compelling because the store environment is merely part of the overall customer shopping experience."
Over the last year or so, RadioShack has seen particular success with wireless sales, and back in January, it made sense to imagine that upgrades had been spurred in part by the wireless portability law as well as a slightly more confident consumer. These days, new, exciting features such as camera phones likely continue to drive customer upgrades. However, how much longer can it last?
Furthermore, while RadioShack's wireless sales were up 16% and computer equipment sales increased 14% last quarter, sales in five other departments slipped by 10%. So it stands to reason that a little of that "reinvigoration" is needed.
My Foolish colleague Seth Jayson has pointed out in the past that, while penchants like his for solder, wire, and connectors may drive customers to RadioShack, other venues likely spring to mind for the lion's share of consumer electronics, such as Motley Fool Stock Advisor stock Best Buy (NYSE:BBY) and its rival, Circuit City (NYSE:CC).
An interesting note, however, was mention of strategic alliances that should "accelerate the adoption rates of certain technology products." Again, while that sounds potentially exciting, it might have been nice to have more specifics. (Not to mention, many investors are likely awaiting word on how its distribution of Sirius Satellite Radio (NASDAQ:SIRI) is going.) It mentioned other sales channels that it has discussed in the past, such as kiosk sales and wireless repairs.
Long story short, I found myself wishing for a little bit more detail from the announcement. For now, while yesterday's news sounded nice, it seems the best course of action is to keep an eye on the execution.
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Alyce Lomax does not own shares of any of the companies mentioned, but she's been known to go to RadioShack for her own odds and ends.
