New RadioShack CEO retooling store design to reboot sales

Posted Sunday, Jul. 21, 2013  comments  Print Reprints

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Joe Magnacca doesn’t think RadioShack needs to be reinvented, just rebooted.

The veteran merchant, who took the reins as CEO of the Fort Worth-based electronics retailer in February, is hard at work rethinking the chain’s 4,400 company-owned stores to provide a cleaner, more contemporary look along with products that will attract younger consumers.

Showing off the company’s newest concept store in Manhattan to reporters last week, Magnacca pointed out an upfront display of stylish Beats headphones and a sound wall, where shoppers can listen to music on various speakers. Apple and Samsung products have been grouped together, and cellphones pushed to a side wall near the rear.

The goal is to reposition RadioShack in the minds of consumers as a source of fun and hip technology, not just phone accessories, cables and batteries. He wants to introduce the company to a new generation of shoppers.

“Technology creates change, and change is good for RadioShack,” said Magnacca, who came to RadioShack after executive stints with Walgreens and the Duane Reade drugstore chain.

“We sit in a relevant space, the technology space, but for a time we’ve had an irrelevant brand,” Magnacca said. “Our job is to revive that brand.”

Whether a new store design can reignite sales is unknown. But it’s clear that Magnacca is bringing a merchant’s touch to a company that has struggled under the leadership of finance specialists for several years.

The company lost $139 million in 2012, as sales declined by 2.7 percent to $4.26 billion. Last summer, the company suspended its dividend as its stock price fell to an all-time low, and in September, the board fired Jim Gooch, a former chief financial officer who had been CEO for just 16 months.

Analysts expect the red ink to continue when second-quarter results are released on Tuesday. In a research note last week, analysts at Deutsche Bank told clients they expect a drop in same-store sales of 5 percent and a loss of 17 cents a share, or roughly $17 million.

The previous management team “was risk-averse, it was a finance-run company,” Magnacca said. “In that environment, unproven inventory is not a bet that you make. I’m the opposite.”

Since joining RadioShack, Magnacca has hired several new executives, including Michael DeFazio, a former colleague at Walgreens who is senior vice president for store concepts, and Jennifer Warren, a veteran retail marketing strategist, as chief marketing officer.

In the past two months, his team has been working on new store concepts, converting the RadioShack on Camp Bowie Boulevard near Interstate 30 in Fort Worth into a “living lab” store. Display by display, merchandising executives reviewed each product category to “eliminate redundancies,” Magnacca said, and look for new product opportunities.

While mobility products, or cellphones, still contribute about half of the company’s revenue, Magnacca believes that the company became too reliant on the segment, which has changed dramatically since RadioShack became a player in cellphone sales more than a decade ago. “We probably backed off on product development in nonmobility,” Magnacca said.

So RadioShack will turn its attention to other growth areas, such as sound. Hoping to play off its history with Realistic speakers a generation ago, a bigger selection of speakers and headphones will be added to the front of its stores once they are reconfigured later this year. Docking stations will allow shoppers to compare various headphones, and new private-label speakers have been added.

Hundreds of products have been removed to create space for emerging categories, such as a rack of digital fitness products. And its Apple products are being pulled together to emphasize their presence.

The New York concept store, at 81st and Broadway on Manhattan’s upper west side, offers more interactive features such as touchscreens to provide information on phone plans. It’s one of about a dozen such “high-touch” concept stores RadioShack will open in upscale markets.

Analysts have responded positively to the changes but remain cautious about the future.

In a report titled “Welcome to the 21st Century,” David Strasser of Janney Capital Markets said the New York store looks “Applish,” saying it is “much more shoppable, far superior at explaining the products it sells, and provides greater flexibility to shift merchandising as products emerge and fade away.”

For the store design to result in higher sales, RadioShack will have to prove that it can stock the hottest products and train its sales associates to explain how they work, Strasser wrote. RadioShack “needs to be a much better service organization.”

Deutsche Bank said it believes that “a new management team could potentially turn around the company, but we don’t think we will see tangible signs of the turnaround yet this quarter.”

Refashioning thousands of stores takes money, and that issue came to the surface in a recent report from, speculating that RadioShack was meeting with bankers to seek advice on dealing with its mounting debt.

Last week, Magnacca said he was indeed meeting with bankers in New York, but said the discussions involved a normal exploration of financing alternatives, not averting a crisis. He said the company plans to make its debt payments with cash and does not have any liquidity problem.

Updating the company’s stores this fall for the holiday season, he said, will not require a capital outlay, adding that “we’re moving stuff around all the time.”

At the Camp Bowie store, Doug Symes, 46, of Crowley, was looking at accessories for a new phone. A long-time RadioShack shopper, he remembers going to the store years ago for fuses, batteries and toys, and noticed how the store’s new design plays to another generation.

“With young consumers, it’s all about music, games and getting online,” he said, checking out a set of headphones. “That’s what they’re playing up with their displays.”

Magnacca hopes so. He said many consumers who are 19, 21 or 23 don’t know anything about RadioShack. With the right products, he thinks the company can play off its heritage of neighborhood convenience and do-it-yourself electronics to re-establish the brand in a new era.

“We play the role of helping people get caught up in technology,” he said.

Steve Kaskovich, 817-390-7773

Twitter: @stevekasko

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