By Bill Bowen RadioShack Corp. is still bleeding red ink, but new Chief Executive Joseph Magnacca is already poised to remodel stores and launch a new branding campaign helping to push up the company’s ailing stock. Although the company’s loss of $43 million during the quarter, was larger than analysts expected, RadioShack stock rose about 3 percent to $3.25 after Magnacca reported plans to change its advertising strategy to attract new customers and to stock new products. “I have … studied the existing retail format and store experience and believe there is a significant opportunity to refresh and improve how we present the brand, how we deliver on our brand promise, and how our customer experiences shopping with us,” Magnacca said in a statement accompanying the earnings report. For the first quarter, RadioShack Corp. reported a net loss of $43 million on sales of $849 million, compared to a loss of $8 million in the year-ago period on sales of $913 million. It was the fifth straight quarterly loss for the electronics retailer on declining revenues. Same store sales, an important measure of retail health, were down 5.7 percent over the year. The net loss was made worse by a one-time charge of $8.5 million from a discontinued deal to sell cell phones and call plans within Target stores. The Target Mobile centers were discontinued before March 1, the company said. The company has $435 million in cash on hand and $385 million available under a revolving credit facility to put Magnacca’s plans in motion. Magnacca was hired from Walgreen in February to turn the ailing electronics chain around. He succeeded Jim Gooch, whose tenure of less than a year was marked by an 85 percent slide in the RadioShack stock price. Only last week Magnacca named two key executives to his team: Jennifer Warren will head marketing and Michael DeFazio was named senior vice president of store concepts. Magnacca said that some key New York area stores will begin remodeling in the next couple of weeks to create the new customer experience. The company is also changing its advertising mix to include broadcast television to introduce the company to people who have not been customers. S&P Capital IQ lowered its opinion on the company’s shares to “Sell” from “Hold” due to weak margins — the amount of each dollar in revenue a company actually keeps — in its wireless business and increasing competition from online retailers and discounters.
RadioShack has to do something to head off falling revenue in established stores, which 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. It provides a peek at the overall health of a brand.
Magnacca said work to revamp stores and revive the brand will start within weeks as the company struggles to fend off further raids on customers from online retailers.
“I know we have some gaps and improvements that need to take place,” Magnacca said. “We are rolling out a new brand image, and you will start seeing changes in our branding and advertising soon. For our physical stores, work is underway and will begin with remodeling strategic New York City locations with a new look and feel over the next few weeks.”
Janney Capital Markets analyst David Strasser said the quarter was “a disaster by any stretch of the imagination,” but said he also saw a silver lining with Magnacca. He pointed to Magnacca’s experience at Walgreen, where he revamped merchandise at the Duane Reade chain.
“Those stores have gone from the ugly stepchild of drug stores, to the best merchandised drug stores in New York City, if not the country,” he said.
For the January-to-March quarter, RadioShack’s loss amounted to $43.3 million, or 43 cents per share, compared with a loss of $8 million, or 8 cents per share, in the same quarter last year. Excluding losses from the company’s Target mobile centers, which all closed by the end of the quarter, RadioShack’s loss amounted to 35 cents per share.
Wall Street was looking for a loss of 11 cents per share and revenue of $962.3 million, according to a poll by FactSet.
Shares of RadioShack Corp. rose 2 cents to $3.16 in late afternoon trading, near the middle of its 52-week trading range of $1.90 to $6.14. The stock has jumped about 49 percent in 2013. But over the past 12 months, it’s still off 47 percent. RadioShack has about 4,300 company-operated stores, including 270 in Mexico and another 1,000 dealers and other outlets worldwide. It has about 30,000 employees.
Associated Press contributed to this story.