Thursday, April 17, 2014

"Even CEO Can't Figure Out How RadioShack Still In Business" $RSH

This Onion article will be seven years old next week!:

One of Day's theories about RadioShack's continued solvency involves wedding DJs, emergency cord replacement, and off-brand wireless telephones. Another theory entails countless RadioShack gift cards that sit unredeemed in their recipients' wallets. Day has even conjectured that the store is "still coasting on" an enormous fortune made from remote-control toy cars in the mid-1970s.
Have any correspondents been to a Shack recently? Thoughts, observations?

3 comments:

Jason said...

I went to my local RadioShack for the first time in years last week. The purpose of/conditions surrounding my visit may give you some insight into the typical customer type.

1) Proximity - there are literally zero electronics retailers within a 20 minutes drive of my house, with the exception of this small RadioShack, which is 5 minutes away. I am 20 minutes from a Target, which has a rather limited selection. I am at least a 30 minute drive to the nearest BestBuy, and I don't care to go there anyway since the store is located in one of those outdoor mall type places that is constantly a mob scene.

2) I had just spent over an hour on the phone after work with Comcast trying to diagnose an internet issue. Finally, they determined I needed a new cable modem. Normally I would just order one from Amazon Prime and wait two days, but my kids and wife enjoy Netflix during the day. Where am I going to find a cable modem at 8:30pm? You guessed it. I called and they had two models that would work with Comcast.

Long story short, I can't imagine a RadioShack store can survive if it isn't significantly more convenient to shop at than another retailer.

Full disclosure: I owned the 7.375 notes that matured in 2011. Have not be involved since.

Steve Sailer said...

When my 92-year-old father lost his hearing aid, the custom hearing aid outlet inside Sears quoted him $5,500 to replace. So he went into a Radio Shack and bought himself an iPod sized amplifier and headphones for $45, which worked surprisingly fine. When he lost that, I tried to get him a replacement at Best Buy, but they only had a much more complicated device for $90.

CP said...

The business has declined precipitously just in the past few years. (It had a billion dollar market cap two years ago!)

According to the financials, the business is half third-party cellphone sales and half electronics business. However based on store visits, it's like going to a cell phone store - people standing around waiting for help with their cell phone or cell phone plan.

You can see the problem with that from the income statement though: revenue of $125k per employee, only 40% of what a BBY employee achieves.

At the RSH average profit margin, that's only $42,500 in gross profit per employee. Even with really cheap employees you don't have much for rent, marketing, and other expenses.

If this is like most retailers, there are unprofitable stores that they need to close.

The other thing they need to do is reduce the interest burn rate by converting into equity.