RadioShack Q3 loss widens; names Penney exec as chief merchant
Fort Worth, Texas – RadioShack Corporation reported a net loss of $112 million during the third quarter of fiscal 2013, compared to a net loss of $47 million in the year-ago period. It was the retailer’s seventh straight quarter posting a net loss. The company also named Paul Rutenis, formerly senior VP, general merchandising manager for the home division of J.C. Penney Company, as its new chief merchant.
RadioShack said its total net sales for the quarter were $805 million, a 10% drop from $898 million a year earlier. The chain attributed the decline to an 8.4% drop in same-store sales due to reduced sales for each of the company’s product platforms.
Joseph C. Magnacca, CEO of RadioShack, said the retailer is currently undergoing a process of reinvigorating and modernizing stores that will affect nearly all of its 4,300 locations. He also said RadioShack is improving its assortment.
"We are moving forward quickly and as planned with our turnaround efforts,” said Magnacca. “As we have said, we expect our work to take several quarters and during that time our results will vary quarter to quarter as we make strategic changes to improve our long-term financial performance. This quarter reflects our strategic decision to accelerate the improvements to the product assortment in our stores by removing duplicate and unproductive inventory."
RadioShack has secured a financial boost from GE Capital, securing a loan of about $835 million. The loan, backed by inventory and other existing assets, will help the chain refinance the company’s outstanding bank debt and free up cash for its ongoing revamp. RadioShack says it has strong balance sheets moving forward.
In announcing the appointment of Rutenis as senior VP, chief merchandising officer, RadioShack said he will be responsible for leading all retail categories, covering well known global brands as well as private branded products, and will work with the company’s executive leadership team to drive a clear merchant strategy and alignment with the retailer’s sales, marketing and operations divisions. Prior to J.C. Penney, Rutenis served in senior positions at Dick’s Sporting Goods and Foley’s Department Stores in a career spanning 22 years in merchandising.
RadioShack also announced the appointment of Janet Fox as senior VP of global sourcing. Fox has spent almost 30 years in retail sourcing, most recently as senior VP, sourcing, quality, materials and technical design at Under Armour.
"We are very happy to have Paul and Janet join our company at a critical point in our turnaround, Magnacca said. “They bring with them a demonstrated track record of success and will contribute to the execution of our strategic initiatives. Since the beginning of the year, we have brought on board six new members of our management team as we rebuild and enhance the strength of our executive leadership."
The company also announced today that Martin Moad, VP and controller, has decided to retire after 34 years with RadioShack, effective Dec. 27. RadioShack’s William R. Russum has been named VP and corporate controller and will serve as the company’s principal accounting officer.
I’d like to try something a bit different for this week’s column: a market-specific conversation! I’ve tapped Dave Cheatham from Phoenix-based Velocity Retail Group, an X Team International Partner, to help me examine the recent ups and downs of the local retail market in Arizona — and what the lessons learned here mean for brick-and-mortar retailers nationwide.
Jeff: It’s great to be sitting in Phoenix talking about growth, construction and new retailer expansion. For so long, we were talking about a “new normal,” lowered expectations and fewer opportunities.
Dave: To talk about the “new normal” you first have to start by identifying what we meant by normal prior to the recession. What we saw in Phoenix before the recession was clearly anything but normal. The ways rents were spiking and commercial developers were speculating in 2005-2007 was totally out of balance with pre-2005 norms.
Jeff: It might be better to refer to the current state of Phoenix retail as getting back to normal: stable, predictable growth.
Dave: We are getting back to a more steady level of population growth, and commercial development mindset that reflects a more rational and more sustainable approach.
Jeff: One of the things that has always distinguished the Phoenix market is that exceptional in-migration you mention — it really drives the regional economy and spurs retail growth.
Dave: I think we are starting to see new job creation, and we were ranked recently as the number one for future new jobs in the nation. That coupled with getting back to strong numbers of in-migration will lead to a more predictable growth that allows you to more accurately predict/project ahead. Compare that with the bubble behavior we were seeing shortly before the recession. I remember commercial developers planning and projecting malls to go in some sites before there were people there!
Jeff: It’s a classic example of that familiar ‘irrational exuberance’ idea.
Dave: Anytime retail developers get ahead of themselves and start building before demand exists, that’s irrational.
Jeff: Because the regional economy is so heavily into construction, the halting of population growth affected Phoenix more than other cities. Even within the state, less overbuilt cities such as Tucson didn’t have the same boom and bust.
Dave: That’s right, and another thing that made the fall so precipitous for the retail sector in particular was the fact that rents were artificially high — that’s something that made the foundation of this recent recession very different from the last truly deep recession in the 1980s. Unlike in the ‘80s, vacancy rates remained in the single digits leading up to the recession, but rents (like home prices) were artificially high. Those high expenses for area retailers meant that, when revenues dropped off, things went upside down very quickly.
Jeff: Retail vacancy rates definitely didn’t stay in the single digits during the recession, that’s for sure. Retailers were also hit with multiple problems at the same time: the growth of online shopping options, the high rents and the housing crisis itself made it a perfect storm that affected Phoenix more than the average city. We have had to absorb most of that vacant space before real local growth resumed, and I believe recent development shows we’ve turned that corner.
Dave: There were a couple of years there when value retailers were the only ones opening a significant number of new stores—that was also an opportunity for them to get into a market many of them they couldn’t afford previously.
Jeff: Traditional retailers have only recently begun expanding in earnest again in Phoenix — is that another sign that things are moving forward?
Dave: I think so, yes. I also think that Phoenix has a lot of intangibles going for it: it’s relatively affordable, there’s plenty of sunshine, and we have a stronger-than-average job market. I see some parallels to one of the strongest areas for retail in California, the Inland Empire, in the way Phoenix has gone through this recession and initial recovery.
Jeff: That’s not a bad comparison: hit hard, but bouncing back well. Perhaps more importantly, the consensus is toward a more state outlook, so we can expect predictable growth for the next few years.
Dave: Keep in mind, Phoenix actually lost more jobs than Detroit over the course of the recession, but its economy is very resilient.
Jeff: Dave, I know we’ve been talking about Phoenix, but a lot of these ideas apply to almost any market in the country.
Dave: No doubt. The specifics and nuanced details of market behavior will always vary from one city to the next or from one region to the next, but the principals can apply in many areas of the country.
Jeff: Let’s hope we’ll continue to see a similarly healthy ‘back to normal’ trajectory for retailers and markets around the country in the months and years ahead.
Dave: Amen to that.
How do you see retail development coming back in Phoenix or in your own backyard? Have we turned the corner from a national perspective? Leave a comment below or email [email protected] to continue the conversation.
Click here for past columns by Jeff Green.
Kohl’s to get jump on holiday shopping season
Kohl’s is the latest department store to announce that it will open its doors at 8 p.m. on Thanksgiving Day, as it kicks off its Black Friday event earlier than ever.
Stores will be open for 28 hours straight, from 8 p.m. Thursday, Nov. 28 through midnight Friday nationwide.
The retailer is also offering a digital variation on the photos with Santa tradition. Starting in November, shoppers can skip the long lines to visit Santa at the mall by taking a photo at Kohl’s Snapshots with Santa in-store photo opportunity in Kohl’s stores nationwide. Customers can snap their picture against a green screen display, select a unique holiday background with Santa and share via email and social media using the Kohl’s Snapshots with Santa app.
Also new this year, and in time for the holidays, Kohl’s iPhone app will feature a new savings wallet, giving shoppers the ability to track Kohl’s Cash right on their phone.