RadioShack CEO voices optimism despite wider quarterly loss

Posted Tuesday, Apr. 23, 2013  comments  Print Reprints
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Even as sales decline and losses mount, RadioShack's new chief executive on Tuesday optimistically touted part of his plan to turn around the ailing Fort Worth-based consumer electronics retailer.

Joseph Magnacca, a former Walgreens executive who joined RadioShack in February, told analysts Tuesday that he will implement sweeping changes to "jump-start our powerful brand."

Among them: a renewed emphasis on profitable private-label brands, a bigger push toward online sales, a "Let's Play" ad campaign aimed at younger consumers, a shift of advertising to network TV and a rearranging of store merchandise by brand name rather than category.

And he sees the chain returning to what it once did very well.

"We are planning to rationalize the number of brands we have and revive the technology innovation capabilities that are part of RadioShack's heritage," Magnacca said during a conference call with analysts after the company's first-quarter results were released.

Sales dropped 7 percent in the quarter, and the company's net loss widened to $43 million from $8 million a year ago, including $8.5 million of red ink from closing phone kiosks in Target stores.

Total net sales were $849 million, compared with $913 million last year. Sales at stores open at least a year, a key retail statistic, were down 5.7 percent. But RadioShack noted that its "signature" platform format outlets generated their fifth consecutive quarter of sales growth among U.S. company-operated stores.

The loss per share of 35 cents, compared with 8 cents last year, was significantly more than the 11 cents estimated by analysts.

Still, the retailer's stock gained nearly 1 percent, finishing up 3 cents at $3.17 a share, apparently buoyed by Magnacca's unbridled optimism.

"I believe in this brand. I am confident that we can renew its relevancy and expand the loyal customer base that chooses to shop with us every day," he said. "We are building a compelling long-term strategic vision and plan that plays to our strengths and is centered around the customer."

Last week, the company announced the hiring of two new executives: a chief marketing officer, Jennifer Warren, and an executive in charge of "store concepts," Michael De Fazio. Over the next few weeks, RadioShack will remodel stores in the strategic New York market.

"We are rolling out a new brand image, and you will start seeing changes in our branding and advertising soon," Magnacca said in a statement.

Amid the poor quarterly results were some silver linings. Excluding postpaid wireless sales, hurt by higher-priced smartphones, gross margins on merchandise improved.

Magnacca also said the turnaround effort will include changes in its online and mobile channels "so our customers receive a compelling, continuous and seamless experience however and whenever they shop with us."

He said the chain is working on something it calls "power merchandising."

Instead of presenting goods by category, it will display them by brand -- so all Apple products and accessories will have their own area, Magnacca said. The concept, which is relatively cheap to implement, will be seen soon at Manhattan stores. "It will be a dramatic change from where we currently sit today from a merchandising perspective," he said.

A buying team just returned from a five-week stay in China, and Magnacca said that could lead to more private-label goods that provide higher profit margins than national brands. He said products in the pipeline fall heavily under the do-it-yourself category and will include new microcontrollers and kits this summer.

"While my assessment is not yet finished, we are taking actions and not standing still."

KeyBanc analyst Brad Thomas liked what he heard Tuesday, but he didn't alter his neutral "hold" recommendation to investors.

"Overall, we are hopeful that new CEO Joe Magnacca can help improve merchandising and marketing, and bring stability, if not growth, to the wireless business," Thomas said in a research note. "However, we are lowering our estimates and recommend investors stay on the sidelines until we see evidence of stabilization."

Barry Shlachter, 817-390-7718

Twitter: @bshlachter

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