Last week it was reported that the Radioshack/Netflix snafu was the biggest issue facing the struggling electronics retailer. It seems that bigger issues are on the horizon. On Tuesday, March 4th, 2014, Radioshack stated that it will close 1100 stores. This will affect approximately 20% of their retail locations.
CNN Money reports that store locations that had been open for at least a year struggled last quarter, with sales at those locations decreasing by 19%. The closing of 1100 stores is a cost cutting initiative that will remove stores that were projected to lose money over the next year.
Radioshack will still have a sizable brick and mortar presence following the downsizing. They currently have 5200 locations, the downsizing will leave them with 4000 retail stores, 900 of which are franchises. To compare, Best Buy, one of the top electronic retailers in the country, has around 1400 locations.
Radioshack stock fell a little over 15% Tuesday afternoon, reflecting investor concern over this downsizing plan. However, the stock is still trading at a higher price than some of the lowest points of the last year.
This is no doubt a setback for Radioshack, but it does not spell the end for the retailer. Their recent Super Bowl ad presented a redesigned and re-branded Radioshack that was coming out of the 80's. Snappy advertising, trimming the fat of retail locations, and more promotions like the ongoing Netflix 6 free months promotion are great way to help the company return to profitability.
The key is effective implementation. It is imperative that Radioshack actually recreates themselves and provides true value to customers, rather than simply saying that they are. Time will tell if cutting back on these unprofitable locations will be the beginning of a turnaround or the beginning of the end for Radioshack.