NEW YORK RadioShack's new CEO Joe Magnacca has big plans to enhance the company's image. But is it too little too late?
Magnacca, who stepped in in February, has been working to revamp stores and refresh RadioShack's (RSH) image as the chain struggles to fend off competition from the likes of Amazon.com and eBay.com, reverse slumping sales and strengthen its balance sheet. To do that, Magnacca said the company is transforming about 220 of the company's 4,400 locations into brighter, airier concept stores.
The stores will carry fewer overall items but have a broader array of trendier products like the popular Beats By Dre headphones and digital fitness gadgets. They will have such features as hands-on tablet displays and a speaker wall to let customers compare speakers. And drawing on his background as an executive at drugstore chain Walgreen Co., Magnacca said the company moved impulse purchase items like earbuds, magazines and $9.99 Hex Bug toys from wall shelves to near the cash register.
Locations that are not remodeled will adopt some of the concept stores' remerchandising changes, like displaying phones by manufacturer, say, Apple or Samsung, rather than at tables in the front of the store organized by service carrier.
"I want to be the store that people go to and say, 'I want to go to RadioShack and see what's new and exciting,' " Magnacca said Tuesday during a tour of RadioShack's new New York concept store. "Key for us is how do we make the stores shoppable and not overwhelm the customer."
Magnacca stepped in February, replacing CEO James Gooch after only a year and a half on the job. One key change he is implementing is cutting down on past-peak electronics like home phones, GPS devices and even VHS tape rewinders.
"We used to be known as a company that holds on to products until the very end of their life cycle," Magnacca said. Now those products will be reduced in stores and offered online or not at all.
RadioShack has tried to reinvent itself before. In 2009, RadioShack rebranded as the more informal "The Shack," but that marketing effort did not bear much fruit. In 2011, the company shifted gears to focus on hot smartphones and wireless plans over other gadgets, but those lower-margin products ended up hurting profit more than helping sales.
Revenue fell 3 percent in 2013 and 7 percent in its most recent January to March quarter. Revenue in stores open at least one year declined 5.7 percent this quarter from a year ago. That is a troubling sign for any retailer as the measurement removes the volatility of results from stores that were recently opened or closed throughout the year. It provides a peek at the overall health of a brand.
RadioShack also is facing investor fears about its liquidity. They sent shares down sharply Thursday on a website report that the company was meeting with advisers because it was having liquidity trouble. To reassure investors, the company issued a statement saying that it had $820 million in liquidity at the end of the first quarter and was meeting with advisers only to look at ways to strengthen its balance sheet.
Wedbush analyst Michael Pachter said the new steps are "promising," but RadioShack "may run out of time."
"We expect the company to have difficulty refinancing its debt, and expect cash burn to continue for the next several quarters, while its new initiatives are likely to require ever higher levels of working capital," he said in a note to investors Wednesday.
A clearer picture of how the early days of the restaging of the 92-year-old company is going will emerge when RadioShack reports second-quarter results on Tuesday.
Analysts expect RadioShack to report a loss of 25 cents per share on revenue of $814.7 million, according to FactSet. In the prior-year quarter, RadioShack reported a loss of 21 cents per share on revenue of $953.2 million.RadioShack shares closed up 9 cents, or 2.9 percent, at $3.19, on Wednesday.