illustration by Jon Reinfurt

A New Dawn For RadioShack

The struggling electronics retailer regroups again, this time with an experienced merchant at the helm.

Joe Magnacca is in his element as he bounces around RadioShack’s new concept store on Manhattan’s Upper West Side. The struggling retailer’s CEO is talking a mile a minute, eager to impress that this store offers far more than the customary batteries, cables, and cellphones.

Up front, there’s a display of stylish Beats by Dre headphones with docking stations, so shoppers can test out their tunes. He points to touchscreens displaying product information and taps an iPad by the checkout counter, triggering music from a speaker wall to entertain shoppers while they wait in line.

“I like to say that technology creates change, and change is good for RadioShack,” says Magnacca, a former Walgreens executive who joined the electronics retailer in February. “We sit in a relevant space, the technology space, but for a time we’ve had an irrelevant brand. Our job is to revive that brand.”

Well, no one would argue with that. RadioShack needs to change. For the better part of a decade, the Fort Worth-based company has been either retrenching or on its heels, losing out to big-box rivals, websites, cellphone companies and new technologies.

Before Magnacca arrived, the company was run by two bean-counters, Julian Day and then Jim Gooch, both finance specialists who spent more time reining in costs than driving revenue or improving the product mix.

The focus on cost-cutting kept the company profitable through the recession and appeared to set it up for a sale. But when no buyers showed up, the lack of merchandising attention became painfully obvious. The company lost $139 million in 2012, as sales declined by 2.7 percent and the stock fell to an all-time low. Gooch was let go last September.

With Magnacca, the board has put the chain back into the hands of a merchant. The big question is whether it’s too late.

The company lost another $96.4 million in the first six months of this year as sales fell by 3.9 percent. In August, Standard & Poor’s downgraded the company’s already junk-rated debt by another notch, and warned of a possible default within 12 months unless the business turns around. After making a $214 million debt payment in late July, RadioShack had about $215 million in cash left, S&P said.

Now the upcoming holiday shopping season appears to be a do-or-die affair, but Magnacca says there’s no impending crisis. During the company’s second-quarter earnings call in July, he said that a turnaround will take several quarters and that the company is making progress. Still, the company hired an investment banker to help with financial options.

About a dozen full-blown concept stores, like the one in Manhattan that opened in July, will welcome shoppers by the holidays in high-traffic locations, including Fort Worth’s Sundance Square. Most of the 4,300 company-owned RadioShacks will simply adopt a cleaner look, with fewer products grouped by brand, and cellphones pushed to a wall to make way for trendier goods like headphones and speakers. The fresh ideas are winning good reviews on Wall Street, though the jury is out on whether RadioShack can pull it off.

In a report titled “Welcome to the 21st Century,” David Strasser of Janney Capital Markets called the New York store design “Applish” and “much more shoppable.” But he said RadioShack must show that it can stock the hottest products and better train its sales staff in order to generate higher sales. And changing consumer perceptions about RadioShack will be no small task.

George Low, a marketing professor and associate dean at the Neeley School of Business at Texas Christian University, says there’s still strength in the RadioShack brand, but it’s also a liability. “RadioShack screams old technology. The word radio is in it,” Low says. “It’s sort of the Oldsmobile of electronics retailers.”

He believes the company got off track by not having merchants in charge of the store. “That’s why they took their eye off the ball,” he says. “The CEO of a retailer needs to be a merchandising guy, and that’s who they’ve hired.”

Magnacca acknowledges as much. The company’s previous management was “risk-averse; it was a finance-run company. In that environment, unproven inventory is not a bet that you make. I’m the opposite.” He wants RadioShack to return to its heritage by developing unique private-label products that can attract a new generation into the stores.

TCU’s Low likes that plan. He recalls how the late Charles Tandy built RadioShack into a national chain, with innovations like the first portable computer. That success made Tandy a business legend and a huge civic benefactor in Fort Worth.

“I’m cheering for them,” Low says. “My office is in Tandy Hall.” 


Keep me up to date on the latest happenings and all that D Magazine has to offer.