RadioShack is making progress on its turnaround, according to CEO Joe Magnacca, even if it wasn’t readily apparent in first quarter results the company reported on June 10.
Same-store sales declined 14% due weak customer traffic and softness in the mobile business. Total sales fell to $736.7 million in the quarter ended May 3, from $848.4 million the prior year. The sales decline caused the company’s operating loss to swell to $81 million from $10.3 million the prior year. The company reported a loss from continuing operations of $98.3 million, or 97 cents a share, compared to a loss of $23.3 million the prior year.
"Overall, our first quarter performance was challenged by an industry-wide decline in consumer electronics and a soft mobility market which impacted traffic trends throughout the quarter,” Magnacca said. “In particular, our mobility business was weak due to lackluster consumer interest in the current handset assortment and increased promotional activities across the industry including the wireless carriers. This resulted in disappointing sales and gross margin performance."
Gross margins contracted to 36.5% of net sales from 40.2% of net sales due in part to aggressive price competition in the mobile business, according to the company. Conversely, expenses increased to 45.6% of sales from 39.3%.
Despite the challenging results, Magnacca said RadioShack was making progress on its turnaround strategy and he pointed to efforts to build a pipeline of new products that will bring differentiation and newness to stores in the form of high-margin private brands and exclusive items. The company also recently launched RadioShack Labs, a collaboration with PCH International to support inventors and startups that is designed to feed the retailer a stream of new products. The company is also experimenting with an in store cell phone repair service at nearly 300 locations.
"Our concept stores continue to drive strong sales growth, and we have begun to execute our 100 store remodel program to scale the successful components of our concept stores across our network,” Magnacca said. “We have continued to drive our new 'Do It Together' brand campaign, which highlights one of our greatest strengths, our store associates and the knowledge and solutions they provide to our customers every day."
Meanwhile, he said the company was focused on reducing costs, particularly those which don’t impact the customer experience, and had reduced corporate headcount, reduced discretionary expenses and was leveraging technology.
“Our entire team is focused on executing our vision, adapting to the environment, managing our balance sheet, and driving sustainable change,” Magnacca said.
The company ended the quarter with total liquidity of $423.7 million which consisted of $61.8 million in cash and cash equivalents and $361.9 million of availability under its credit agreement. Total debt was $614.5 million.
RadioShack’s store base consists of 4,250 company-operated stores in the United States, 258 company-operated stores in Mexico and approximately 912 dealer and other outlets worldwide.