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RadioShack is seeking financial rescue. Can redesigned stores help save it?

🕐 5 min read

Sarah Halzack (c) 2014, The Washington Post

In recent years, RadioShack has made a long list of changes to try to save its ailing electronics business: In 2009, it tried unsuccessfully to rebrand as “The Shack,” in hopes that ditching the name of a dated technology would increase its cool factor. About four years ago, the company pivoted its focus to smartphones, only to face headwinds as the market for those gadgets became more saturated.

Now, in its latest turnaround effort, RadioShack is hoping that giving customers a hands-on experience will persuade them to linger in stores longer and open their wallets.

But it may be running out of time.

Sales at stores open at least a year were down 20 percent in the most recent quarter, the company reported Thursday. The company also said that it is seeking fresh capital and exploring options such as debt restructuring, store consolidations and cost-cutting measures.

Surging technology usage has made for choppy waters for the company. Evidence of its struggle has been plentiful: RadioShack’s stock has plunged about 96 percent over the past decade, most recently trading at 94 cents a share after falling as low as 55 cents in August. The company, headquartered in Fort Worth, Texas, announced in March that it planned to close 1,100 stores, only to have to scale back that plan as its lenders would not approve the closure of more than 200 stores per year over the next three years.

RadioShack is remaking some of its outposts into “highly experiential concept stores” that allow customers to have a more hands-on experience with its merchandise.

The company is pitching the remodeled stores as “interactive,” a word that seems ubiquitous these days as many brick-and-mortar retailers try to create a unique experience in their shops to help ward off online competitors. At the outpost on Seventh Street NW in Washington’s bustling Gallery Place neighborhood, the company has added a sleek headphone demonstration station where customers can try out gear from brands such as Beats by Dre and Skullcandy. A “speaker wall” allows customers to sample many of the speakers sold in the store by controlling them from an iPad. Gadgets such as the iPhone and iPad are displayed so customers can play with them, a set-up that marks a change from before, when the shop only showed printed renderings of what the devices looked like when taken out of the box.

“It’s really just all about improving the customer experience and delivering on their expectations for us as a brand,” said Jennifer Warren, RadioShack’s chief marketing officer.

Although these additions might mark a step forward for RadioShack, the ability to test gadgets has long been available at competitors such as Apple and Best Buy. Also, RadioShack plans to remodel only 100 stores by the end of the year — a small fraction of its 4,000 locations.

“They’re right now effectively catching up to what others have done,” said Will Frohnhoefer, an equity research analyst at BTIG.

RadioShack says its new concept stores have had higher-than-expected revenue growth for mobile phones and higher sales of items including headphones and portable speakers.

“Are [the new stores] interesting? Are they better? Certainly. But they have a small number of them,” said Anthony Chukumba, senior equity research analyst at BB&T Capital Markets. “They don’t have nearly enough of them in terms of their overall result.”

Chief executive Joseph Magnacca said during the company’s most recent earnings conference call that the Fix It Here stations also are showing early promise.

In a corner near the front window of the Gallery Place store, a technician sporting a white lab coat sits behind a new Fix It Here kiosk. Here, experts can fix problems such as a cracked cellphone screen, broken phone battery, or a malfunctioning button on a tablet. For $39, they’ll make the repairs in less than an hour. (They’re not equipped to handle more complex problems, such as a damaged motherboard.)

“Stores with this service are outperforming the chain on sales and profit, and we believe Fix It Here drives new traffic to our stores based on customers using this service and the number of calls our stores are receiving,” Magnacca told investors in June.

Fix It Here is offered in 500 stores; the company says it plans to expand that to 700 stores by the end of the year.

RadioShack has long sought to position itself as a destination for do-it-yourself tinkerers, and the redesigned stores show they are doubling down on those efforts. Store Manager Ray Stevens said the company is now offering customers project ideas. In a nod to modern do-it-yourself ethos, the new stores also give prominent display to a 3D printer. In the Gallery Place outpost, the $1,400 printer sits in a glass cube, and store associates program it to churn out items such as cellphone cases and figurines of Pokemon characters so shoppers can see how the cutting-edge technology works.

“It’s something that our customer is very interested in,” Warren said. “They might not be ready to go out and buy one tomorrow, but they’re interested in seeing how it works.”

The revamped stores are one pillar of a broader strategy the company is undertaking to improve its business. This year, it launched RadioShack Labs, a joint venture with hardware developer and manufacturer PCH to allow start-ups to bring innovative products into its stores more quickly. For the holiday season, the company is promising a “more comprehensive gift strategy,” one that includes app-based toys and a line of drones.

On Thursday, RadioShack reported second-quarter revenue of $674 million, down from $861 million in the same quarter last year. Earlier this week, an analyst with Wedbush Securities issued a report saying that he believed a bankruptcy for RadioShack was “imminent.”

Analysts say the new efforts and a cash infusion might not be enough for RadioShack to mount a comeback. “It’s rearranging the deck chairs on the Titanic,” Chukumba said. “It’s not enough to move the needle.”

Robert Francis
Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

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