RadioShack is set to close 1,100 across the US as part of a strategy to deal with what it calls underperformance, which is plaguing the company’s revenue. The news of the planned closures comes on the heels of poor quarterly earnings recently reported by the tech-retailer. The disappointing earnings report caused shares to tumble nearly 15% in trading.
Although RadioShack has been quite open about the troubles it has been facing, many of the details were kept quiet by the company. The recently disclosed planned-closure of nearly one fifth of RadioShack stores is part of a larger rebranding effort, in which the company hopes to touch-up its image and modernize its appearance.
The “holy-day” season, where retailers all across the country expect to earn some of their highest sales numbers each year, was not particularly kind to RadioShack. The company suffered poor “holy-day” sales this last year, and attributed the disappointing numbers to a number of factors. RadioShack credited reduced foot-traffic along with a severe winter for contributing to the low sales numbers, and while the company offered huge discounts it simply could not do enough to mitigate the problems which led up to the recent news of store closures.
Joseph Magnacca, the company’s CEO stated that RadioShack’s planned closure of 1,100 stores would leave the company with about 4,000 stores in the US. Although Magnacca and the company have been relatively open about the planned closures, it has not been confirmed exactly which stores will be closed and how many jobs may be affected as a result. The company did say however, that the stores to be closed are selected based on a number of factors including performance, location, and their surrounding demographics.
Part of the problem for RadioShack is that it is perceived as being somewhat outdated. This was highlighted by the advertisement which aired during Super Bowl time that poked fun at the “outdated” image of the store. The advertisement showed old 80’s characters running through and “taking back” their RadioShack stores. The company for its part has acknowledged that it needs to update its look and be more on the cutting edge of technology trends in order to better satisfy its customers.
The tumble in RadioShack shares came as the reported quarterly earnings for the fourth quarter turned out to be significantly below analyst expectations. While the decline in earnings was expected, analysts were looking for a decline in revenue from $1.17 billion last year to somewhere around $1.12 billion. RadioShack however, suffered a drop in revenue all the way down to around $935 million. The company also posted an annual loss of nearly $400 million, which represented almost double the amount of losses from the previous year. When it was all said and done, the company shares had fallen another 14 percent shortly after the release of the earnings report, and the stock is down more than 20% from this time one year ago.
In spite of the poor earnings news, and the news of the planned closures, RadioShack will still have a sizable presence within the US, and the company does also enjoy significant international operations.
RadioShack’s planned closure of 1,100 US stores has obviously hurt shares to some degree, but the silver lining may be that the firm has now an action plan to rejuvenate its image and it looks to be moving in the right directions. For now, analysts and interested employees will await news on which stores will make up the more than 1,000 locations to be closed down in the near future.
By Daniel Worku