RadioShack profit misses, revenue up; turnaround expert named interim CFO
Fort Worth, Texas – RadioShack Corp. on Tuesday reported a second-quarter loss that was bigger than analysts expected. However, revenue beat expectations, with the first increase in same-store sales since 2010, and the chain announced it was bringing on consultants to help with its turnaround.
RadioShack said CFO Dorvin Lively, is leaving the company to pursue another business opportunity. (Lively was named CFO at New Hampshire-based Planet Fitness, an operator of 650 health clubs.) It also said it is working with AlixPartners, a global business advisory firm with expertise in corporate turnarounds, and investment banking firm Peter J. Solomon Co. to help with its overhaul. AlixPartners managing director Holly F. Etlin will serve as interim CFO.
The retailer reported a net loss for the three months ended June 30 of $53.1 million, versus a net loss of $21 million last year. Revenue was nearly flat at $844.5 million, above Street projections of $816.1 million. Same-store sales were up 1.3%. And revenue in stores open at least one year rose 1.3%, the first increase in that metric since 2010.
“While the second quarter presented a number of challenges, it is noteworthy that we generated comparable store sales growth for the first time since 2010, and increased sales for the sixth consecutive quarter in our high-margin signature platform of products,” said CEO Joseph C. Magnacca. “In addition, we made progress on the initiatives we outlined last quarter in repositioning our branding, opening a new concept store, streamlining our product assortment, and entering new strategic partnerships.”
Magnacca, who joined the company in February, said he expects the company’s turnaround will take several quarters, and during that time its results may vary from quarter to quarter as its make strategic changes to improve its long-term financial performance.
“We will be guided by the five pillars of our turnaround strategy – repositioning the brand, revamping our product assortment, reinvigorating our stores, operational efficiency and financial flexibility,” he said.
RadioShack said it ended the quarter with total liquidity of $818 million, with total debt of $713 million at June 30.
Comps increase, profits tumble and CFO out at RadioShack
Same store sales increased 1.3% at RadioShack during the second quarter, but clearance driven sales activity took a toll on profitability and the retailer enlisted the services of several turnaround firms.
The company’s loss for the period ended June 30, more than doubled to $53 million, or 53 cents a share, from $21 million the prior year and gross margins declined to 37.2% from 40.1%. The 1.3% same store sales increase the company reported, its first since 2010, was driven by clearance activity. While total sales declined slightly to $845 million from $849 million due to the closure of stores.
The company also announced that CFO Dorvin Lively left to pursue another opportunity after roughly two years with the company. Lively was named CFO at New Hampshire-based Planet Fitness, an operator of 650 health clubs with 4.5 million members. Filling Lively’s shoes on an interim basis is Holly Etlin, a managing partner at AlixPartners. A search is underway for a permanent CFO.
RadioShack said it hired AlixPartners, a global business advisory firm, and investment banker Peter J. Solomon Company to support and accelerate the company’s turnaround.
The comp increase the company reported was one element of that turnaround as RadioShack sought to streamline its product offering during the quarter. The company also opened a new prototype store in New York and entered new strategic partnerships.
"At the same time, our profitability was not where we would have liked. Our strategy this quarter was designed to move through unproductive inventory and test a variety of promotional vehicles, which we knew would have an impact on gross margin rate, but would help us identify opportunities to better align our promotional marketing going forward,” said CEO Joe Magnacca. "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. We will be guided by the five pillars of our turnaround strategy – repositioning the brand, revamping our product assortment, reinvigorating our stores, operational efficiency and financial flexibility.”
Magnacca contends RadioShack has a clear plan of action that, “will return this company to a position of prominence in the lexicon of American retailers.”
Best Buy asserts innovation with OLED TV
A new era in television technology emerged at Best Buy this weekend which takes screen thickness, picture quality and price points to unprecedented levels.
Best Buy’s high end Magnolia shop in located inside its Richfield, Minn., store became the first U.S. retailer to sell LG Electronic’s OLED HDTV. The 55 inch OLED (organic light emitting diode) television features a super thin curved screen that is less than a quarter of an inch thick and retails for $14,999.
At that price, the television clearly appeals to the most affluent of early adopters and soon will be available at Best Buy’s Magnolia stores in Los Angles, New York, Miami, Houston, Dallas, San Francisco, Chicago, Seattle and San Antonio.
"The OLED TV experience is one that must absolutely be seen to be believed," said Jay Vandenbree, SVP of LG Electronics USA, and head of LG’s U.S. home entertainment business. "The next-generation display technology and the ground-breaking ultra-thin curved design in the LG CURVED OLED TV results in an experience that is destined to be the benchmark for home viewing and TV design going forward. There’s no better evidence that with LG, it’s all possible."
According to Mike Mohan, Best Buy’s president of home, offering such a product fulfills the retailer’s promise to customer to be the one place with the latest in home entertainment technology.
"As the exclusive launch partner for the new TV, we are giving consumers first access to this OLED technology."
The arrival of OLED television has been eagerly anticipated for years by retailers who have watched as the conventional LCD and Plasma television models experience considerable price deflation. OLED televisions are likely to be highly coveted by early adopters who tend to be less price sensitive when it comes to new technology. According to LG, global demand for OLED TV is forecast to grow to more than seven million units by 2016 based on estimates by DisplaySearch.
OLED TV brings a “Wow” factor back to a category where shoppers have grown accustomed to large, thin screens and clarity levels that already make celebrities and sports officials cringe. OLED TV takes things to a new level, certainly in terms of thinness at 0.17 inches, but the screen is said to produce astoundingly vivid images thanks to a proprietary four-color pixel technology known as WRGB. A white sub-pixel that works in conjunction with conventional red, green and blue pixels creates the perfect color output and then LG’s exclusive Color Refiner delivers even greater tonal enhancement, resulting in images that are more vibrant and natural than anything seen before, according to the company.
Top that off with a gently curving screen, and the result is an in-home viewing experience that shoppers are likely to crave for years to come, making retailers happy and theater operators nervous.