NEW YORK - RadioShack’s second-quarter loss widened as the struggling electronics retailer works to revamp its stores and product assortment ahead of the crucial Christmas season, the company said Tuesday.
Although the loss was bigger than analysts expected, revenue beat expectations and the company said it is bringing on consultants to help improve results.
RadioShack has been cutting costs, shuffling management, and revamping stores and product selection to battle tough competition from online retailers and discount stores that have expanded their electronics offerings.
In a call with analysts, Chief Executive Officer Joe Magnacca, who came aboard in February, said he expects the turnaround to continue for the next several quarters, buthe said a streamlined assortment of products - with more emphasis on categories such as digital fitness and accessories such as headphones and speakers - should be available in stores by the critical Christmas shopping season, during which retailers can bring in up to 40 percent of all revenue.
The Fort Worth-based firm is also revamping 5 percent of the company’s 4,400 stores to make them airier and less cluttered with more customer friendly displays.
“We have a clear plan of action, and our team is completely focused on driving the business forward,” Magnacca said.
RadioShack’s turnaround plan makes sense, Morningstar analyst Liang Feng said, but the company has a small window of time to make it work since its capital is limited and the Christmas season is only a few months away.
“They’re taking the right steps,” he said, “but it’s a very steep hill to climb.”
In seeking outside help to make sure it is on the track, Magnacca said, RadioShack has enlisted business advisory firm AlixPartners and investment banking firm Peter J. Solomon Co.
RadioShack’s chief financial officer, Dorvin Lively, has left the company to take a CFO role at fitness chain Planet Fitness. AlixPartners Managing Director Holly F. Etlin will serve as interim CFO.
Revenue results indicate the turnaround might be gaining traction in its early stages.
Revenue was nearly flat at $844.5 million, handily beating analysts’ expectations of revenue of $816.1 million, according to FactSet. And revenue in stores open at least one year rose 1.3 percent, the first increase in that metric since 2010. Revenue in stores open at least one year is a key retail statistic because it excludes stores that open or close during the year.
But most of the revenue gains were driven by markdowns and promotions such as “spend $30, get $10 back” in an effort to drive traffic into stores and to clear out merchandise. That took a toll on gross margin, or the amount of each dollar in revenue a company actually keeps.
The gross margin decline and investments are taking a heavy toll on profitability. Net loss for the three months ended June 30 totaled $53.1 million, or 53 cents per share. That compares with a net loss of $21 million, or 21 cents per share, last year. The loss is more than double the loss of 24 cents per share that analysts expected.
Magnacca conceded that profitability was “not where we would have liked.” But he said that the quarter was designed to clear out unproductive inventory and test markdowns and discounts to help improve promotions.
“Looking ahead, we expect the turnaround to take several quarters, and during that time our results may vary from quarter to quarter as we make strategic changes to improve our long-term financial performance,” he said.
RadioShack said it ended the quarter with total liquidity of $818 million, with total debt of $713 million at June 30.
Shares fell 15 cents, or 5.1 percent, to close Tuesday at $2.78. The stock has traded between $1.90 and $4.28 over the past 52 weeks.
Business, Pages 25 on 07/24/2013