RadioShack Tries New Concept Stores To Spur Turnaround Efforts

RadioShack (NYSE:RSH) opened its third concept store in New York earlier this month as part of its strategy to re-position its brand and turnaround its business. The company opened its first concept store more than a month back in an effort to make a big impact on the electronics shopping market and improve the Radio Shack customer experience by promoting an interactive experience in its stores. These concept stores offer interactive areas like the speaker wall where shoppers are able to connect their mp3 players and other mobile media devices to experience technology.

As a prominent player in the retail business for over 90 years, RadioShack has been struggling to survive in the industry as the level of competition has risen manifold in the last few years. With eroding top line growth, declining gross margins, high inventory levels, a string of debt maturities and declining cash reserves, the company has been working on devising a new strategy to turnaround its business since the last few months. The main focus of its initiatives is on re-branding the chain and re-defining what it stands for.

RadioShack already has concept stores in California, Massachusetts, New York and New Jersey, and has ten locations currently under construction for new concept stores (around the nation), with which it aims to reinvigorate its store experience. It will open its next concept store in Fort Worth, Texas, in October this year. Located at the Sundance Square commercial building, the 2,357 square feet store promises to feature the most in-demand products, brands and technology.

Another addition RadioShack has been working on is the low-touch concept store which will provide customers with a cleaner, more “shoppable” environment with open floor plans, low-profile fixtures, refined product assortment and better product placement. The company claims that these require minimal investment but provide maximum impact to its brand value. The new format will open in select markets by this fall.

RadioShack not only competes with other physical retailers such as Best Buy (NYSE:BBY) and Wal-Mart(NYSE:WMT), but also faces intense competition from online retailers like Amazon (NASDAQ:AMZN) and online auction sites like eBay (NASDAQ:EBAY). The entry of online retail giants has altered the landscape for the consumer electronics market. Showrooming, a phenomena where customers use physical stores to check out products and gain hands-on experience with gadgets, but use online stores to make the purchase has negatively impacted sales of traditional brick-and-mortar retailers.

The main goal of RadioShack’s re-branding initiative is to make its stores more shoppable by providing a satisfying experience to its customers. The company has been reporting disappointing results for quite a while and we have yet to see any significant gains from RadioShack’s turnaround strategy. However, the company claims to be making strong progress on repositioning its brand, revamping the product assortment and reinvigorating its stores.

RadioShack hopes to achieve higher operational efficiency and improve its financial flexibility in the future with these initiatives. The company claims that it will take several quarters of strategic changes to improve its long-term financial performance.

With a price estimate of $2.87 for RadioShack we feel that the market assigns a fair valuation to the company.

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