RadioShack Profits From Mobiles, But Best Buy And Rivals Loom
Long-troubled RadioShack, aka "The Shack," posted higher than expected profits for the past quarter. It attributed the success to a new focus on mobile phones, but RadioShack will need to do a lot more to sustain those profits.
From Daily Finance:
Focusing on cell phones seems to be paying off for RadioShack (RSH). The electronics retailer's first-quarter profit rose 16% to beat analysts' expectations, thanks to sales of cell phone handsets and prepaid wireless services.
RadioShack's earnings climbed to $50.1 million, or 39 cents a share, from $43.1 million, or 34 cents, a year earlier. Analysts had expected earnings of 36 cents, up 5.9%, according to the Thomson Reuters consensus estimate.
Comparable sales for stores open at least a year rose 4.7% during the 2010 first quarter, which management said was thanks to rising sales of Sprint Nextel wireless phones and service and the addition of T-Mobile.
Retooling the Company
RadioShack's sales of wireless handsets jumped 48.8% in a year -- including a 60% increase in prepaid wireless handsets -- and sales of wireless services gained 24.8% thanks to rising sales of prepaid airtime.
Meanwhile, sales of personal and home electronics and accessories declined, further supporting the decision to retool the company from the go-to retailer for electronics geeks to a multibrand cell phone store.
"Our performance this quarter highlights the success of our strategy to increase our focus on mobility, connectivity and innovative products and services," said CEO Julian Day, in a statement.
This is great news for The Shack, but it isn't a long-term plan for success over its rivals. A prime example is Best Buy. Best Buy has taken the spaghetti-against-the-wall approach, trying downloadable movies, iPad and Kindle sales, and other stuff to see what sticks. But Best Buy is also smart enough to focus on products that cannot easily be found elsewhere. When it comes to downloading digital movies, it has Blockbuster, Netflix and, now, YouTube as immediate competitors. When it comes to selling the iPad, it has only the Apple Store as an immediate competitor.However, when it comes to selling mobile phones, The Shack has the Apple Store, AT&T, Sprint, Verizon, T-Mobile, and so on -- as well as Best Buy.
The big difference between The Shack and Best Buy? Best Buy actually has some semi-exclusive hardware. If you want an iPad, you go to Apple or Best Buy. I'm not aware of any exclusivity agreements The Shack has in the works -- and it will need some exclusive, like being an authorized Google Tablet dealer or something, to maintain some meaningful differentiation, as rumored, to attract an acquisition later this year.