The Breakdown

Explaining Southern California's economy

Why RadioShack is closing stores and struggling

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RadioShack plans to close up to 1,100 underperforming stores nationwide, as the electronics retailer struggles to reinvent its image amid declining sales. 

The Fort Worth, Texas-based chain reported a net loss of $191.4 million during its fourth quarter, more than triple its losses from a year earlier. Net sales and operating revenues plunged 20 percent to $935.4 million in the fourth quarter, the company said.

"Without minimizing the challenges ahead, we have a detailed strategic path to profitability based upon the five pillars of our turnaround," said CEO Joseph Magnacca in press release. "Our entire team is focused on execution as we work to improve our performance in the coming year." 

So what does RadioShack have to work on? A lot.

In the past, RadioShack built itself as an electronics convenience store, said Scott Tilghman, a senior analyst at B. Riley & Co. The retailer wasn't a "destination store" like a Best Buy where customers could spend a long time browsing different electronic items, he said. 

RadioShack is trying to change that. The retailer has focused its merchandise mix on products like headphones, wireless speakers and improving their tablet line up, while scaling back on clock radios and parts used for electronics projects, Tilghman said. 

The retailer has also tried to improve the look of some of its stores. The first new "concept store" in California opened two months ago in Lynwood. The new store has a speaker wall and places where customers can try the products, including a remote control toy exploration center. RadioShack plans to create more concept stores this year.

"They are taking steps to revitalize the brand, but it may be a little too little too late, because it’s really challenging for them to completely change their image," Tilghman said.

RadioShack also has steep competition from other retailers. Shoppers can order products online at a good price without ever leaving their homes. 

Unlike Best Buy, RadioShack doesn't have as much selection when it comes to the mobile phones, Tilghman said. Plus, if a customer is into a certain cell phone carrier--let's say T-Mobile, the customer can shop directly at the T-Mobile store and skip RadioShack altogether.

The company's transformation will take time and it will be an "uphill battle," Tilghman said. RadioShack acknowledged some of the shortcomings of its business in its Super Bowl commercial last month. In the ad,  a RadioShack employee says, "The 80's called. They want their store back."

The company said it is not releasing the locations of underperforming stores it plans to close at this time. RadioShack said in a statement that it "will maintain market coverage as part of the plan, with over 4,000 U.S. stores" in its footprint. 

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