RadioShack Corporation

FOUNDED: 1919 as Hinckley-Tandy Leather Company
VARIANT NAME: Tandy Corporation

Contact Information:

HEADQUARTERS: 100 Throckmorton St.
Fort Worth, Texas 76102
PHONE: (817)415-3700
FAX: (817)390-2774 URL: http://www.radioshack.com

OVERVIEW

In early 2001 RadioShack Corporation offered more than 22,000 different electronics products and planned to add another 10,000 throughout the course of the year. The firm's products can be purchased through its Web site and catalog as well as through its retail outlets. Its varied product line includes virtually everything connected with electronics, and RadioShack has become famous as the source for electronics parts that cannot be found anywhere else. In addition to electronic parts and accessories, RadioShack sells cellular, PCS, and conventional telephones; audio and video equipment, such as stereo systems, radios, and televisions; home satellite systems; personal computers and accessories; and a number of specialized items such as weather radios. RadioShack also acts as a middleman for services offered by firms with which it has forged strategic alliances, including DirecTV Inc., Microsoft Corporation, Sprint Communications, Thomson Multimedia, and Verizon Wireless.

Headquartered in Ft. Worth, Texas, RadioShack maintained a network of 7,199 stores in the United States at the beginning of 2001, of which 5,109 were owned outright by RadioShack Corporation. The rest were dealer franchises that sold RadioShack products together with other retail lines. RadioShack stores are usually located in shopping malls and strip malls, although some are stand-alone buildings. Virtually all RadioShack stores are leased by the firm. In addition to its stores, the company also owns and operates seven facilities in the United States and one in China that manufacture RadioShack products including telephones, antennas, wire and cable products, and a variety of other hard-to-find consumer electronic parts and accessories. There are 56 Radio-Shack Service Centers that repair all products purchased at RadioShack stores. The ten regional distribution centers ship more than 1 million cartons of goods to RadioShack stores monthly. Four of the centers also fill orders made through the RadioShack Web site.

COMPANY FINANCES

Number 360 in the Fortune 500, RadioShack Corporation reported $4.794 billion in sales in 2000, an increase of 16.2 percent from 1999 results. The growth was partly the result of the addition of 22 new stores to the RadioShack chain. On the other hand, RadioShack's sales per employee ratio dropped precipitously during the latter half of the 1990s, reaching only $33,840 in 2000—a 31 percent drop from 1997. The company's gross profits ($2,369 million in 2000) grew at a slightly slower rate than they had in 1999.

In 2000 telephones and other communications products were RadioShack's leading product area, accounting for nearly 28 percent of the company's total sales. Electronic parts and accessories were second with just under 25 percent. With 22.5 percent of 2000 sales, audio and video merchandise showed the greatest improvement, up more than 5 percent from 1999. The rest of RadioShack's sales were personal electronics, seasonal merchandise, computers and peripherals, and services. Long a favorite of hobbyists and other consumers, RadioShack has also begun attracting a significant number of clients in the business, governmental, and educational sectors, thanks in particular to its presence online. Most of the firm's sales were made within the United States.

RadioShack's common stock price fluctuated from a low of $35.06 to a high of $72.94 in fiscal year 2000. Its price-earnings ratio for 2000 was 16.1.

ANALYSTS' OPINIONS

Analysts saw RadioShack facing a challenging period in 2002. Sales growth in 2001 was below levels targeted by the firm and, in the view of Merrill Lynch analysts, those goals were likely to remain frustrated partly because of structural changes in the marketplace in which RadioShack operates. The company, they predicted, would be hurt by a downturn in wireless communication sales—one of RadioShack's most important sales sectors—which had "already peaked." Personal computer sales were very weak, "largest rate of decline of any of the major consumer electronic retailers," in part because of RadioShack's decision not to stock notebook computers. Personal electronics sales would continue to suffer, analysts at Merrill Lynch speculated, unless RadioShack lowered its relatively high prices. Electronic parts continued to perform well; however, those customers were not purchasing items from other parts of RadioShack stores. Robertson Stephens found fault with RadioShack's plan to cut costs by reducing inventory at its stores, pointing out that "the RadioShack brand stands as a resource for hard to find electronic connectors, batteries, and accessories. . . .We remain concerned about the possibility that the company's inventory turn improvement goals are at odds with its ability to satisfy customers, which requires an increasingly deep and broad product assortment."

HISTORY

RadioShack was founded in 1919 as HinckleyTandy Leather Company, a firm that distributed products for the manufacture and repair of shoes. After World War II, the firm switched its focus from shoe repair to leather-craft and hobbyists, a market that would later be important to RadioShack. Renamed the Tandy Leather Company, the company was acquired by American Hide and Leather in the early 1950s; by the end of the decade, however, Charles Tandy, the son of Tandy's founder, had won control of American Hide and rechristened the firm the Tandy Corporation.

In 1963 Tandy made the most important move of its history—it purchased RadioShack, a east coast chain of nine stores that sold radio and hi-fi equipment to the home and hobby markets along with a line of electronic parts for do-it-yourselfers. By the early sixties, the chain was on the verge of a bankruptcy; however, by 1965 Tandy Corp. had turned the chain around and made it profitable once more.

The 1970s were a key period for the Tandy Corp. In 1974 it decided to focus exclusively on electronics and sold off its leather business. By 1976 when the citizens band (CB) radio craze hit and RadioShack's radio sales increased dramatically, that decision looked like a stroke of genius. The following year RadioShack marketed a major innovation—the first mass-produced, pre-assembled computer for home use, the TRS-80. Priced at $599.99, the TRS-80 was a sensation. It made RadioShack a household name and sold more than 200,000 units between 1977 and 1981. By 1983, however, other companies, such as IBM, were bringing out their own more sophisticated personal computers. Sales of the TRS-80 plummeted. In 1984 the company held on to less than nine percent of the computer market. In response Tandy introduced two new IBM-compatible computers, as well as setting up its own specialized computer centers where brand name computers were sold. During the 1980s RadioShack launched other innovative products, including a mobile/portable cellular that consumers could install themselves and a TV satellite system for do-it-yourselfers.

The 1990s were a time of reorganization for Tandy Corp. In 1993 it separated its retailing and manufacturing operations. A year later it sold off the manufacturing side completely and diversified its operations. In 1994 it launched two new retail chains: Incredible Universe, a store that specialized in science and nature items, and Computer City. By the end of the 1990s, the company had begun paring back to its original tight focus on electronics. In 1998 it sold Incredible Universe to Fry's Electronics, and it sold Computer City to CompUSA. In 2000 the company changed its name to RadioShack Corporation. The early 2000s saw RadioShack exploring new outlets for its electronics stores, including a later-abandoned plan to expand into Blockbuster video stores. In December 2001 the firm announced a reorganization plan that included the closure of 35 stores that were not performing up to expectations and the trimming of a number of products from its line of merchandise, including televisions larger than 27 inches, car stereos, security systems, and pagers. At the same time, the company announced that it was building a new headquarters in Ft. Worth, Texas.

STRATEGY

RadioShack's basic strategy is to offer a vast line of electronics products, both third party brands and its own in-house Realistic brand, in one place. For many years RadioShack carried only Realistic products. However, since the 1980s, partly in response to the failure of its in-house line of personal computers, RadioShack has also sold third-party brand names. In line with its stated mission to demystify technology for Americans, RadioShack established a chain of stores that extends into most neighborhoods in the United States and put in place a highly trained force of workers, who are able to answer virtually any question a customers might have about products or services.

INFLUENCES

Following a year of disappointing sales, as well as the collapse of its "store within a store" plans with the Block-buster Video chain, RadioShack underwent a major reorganization in late 2001. It closed 35 stores nationwide, including RadioShack Installation Services, its commercial installation business. It discontinued a number of product lines, including large screen TVs, home security systems, car stereo systems, and pagers. The moves were an attempt to cut costs and get rid of high-price, low-margin lines that did not turn a profit. The product cuts also opened up floor space for other goods. Overall, few people lost jobs in the reorganization. Most affected workers were transferred to other areas. It also announced plans to build a new corporate headquarters in downtown Fort Worth.

CURRENT TRENDS

As 2000 began RadioShack was pushing ahead vigorously with its "Store Within a Store" concept, in which an outside firm sells its own products in a designated area of RadioShack stores. The Microsoft Network@Radio-Shack was introduced in 2000, followed by the Sprint Store (in partnership with Sprint PCS) and the RCA Digital Entertainment Center. RadioShack and Verizon Wireless began working together in late 2001. The results of the "Store Within a Store" idea have been positive for the most part. RadioShack expects the strategy to have reached its full potential by 2005.

PRODUCTS

RadioShack sells a broad variety of consumer electronic goods at its stores and through its thick catalogue. Among its popular product lines are wireless phones and service plans, home satellites for TV, and computers. The store is most famous for its line of hard to find electronic items, including cables, jacks, outlets, and circuits. With the rise of CDs, RadioShack has been one of the only sources for phonograph parts, like styluses and arms.

CORPORATE CITIZENSHIP

RadioShack stores participate in the "Rechargeable Battery Recycling" program sponsored by the Rechargeable Battery Recycling Corporation. Under the program RadioShack stores accept for recycling nickel cadmium, nickel metal hydride, lithium ion, and small sealed lead acid batteries that are found in many home and office products, such as wireless phones, notebook computers, and cameras.

GLOBAL PRESENCE

Until the mid-1980s, RadioShack had a network of stores in Canada, the United Kingdom, and Australia that were managed by Tandy Corp.'s international division, InterTAN. Looking to diversify its U.S. business, Tandy spun the division off in 1987, divesting its interest completely. The now-independent InterTAN kept control of all of Tandy's international retail outlets. Tandy maintained a close relationship with InterTAN, nonetheless, supplying it with most of its products and licensing it to use the names "RadioShack" and "Tandy" for its stores. By 2001, in increasingly dire financial straits, the Toronto-based InterTAN had sold off all of its U.K. and Australian holdings. There was speculation in the Canadian press whether the U.S. RadioShack, sharply focused on electronics retailing once again, would repurchase InterTAN.

EMPLOYMENT

RadioShack employs a large workforce of sales associates in its stores. Before starting work, sales associates are required to complete the new associates training program, the so-called "Fast Track to the Sales Floor." The program, which is taught via manuals and CD-ROMs, covers sales skills and the RadioShack product line. Prospective associates study the material on their own at their own pace, usually for one to two-and-a-half weeks. Store managers hold monthly Saturday morning classes to brief employees on new products and products featured in RadioShack monthly flyers. Training for managers is ongoing as well. Six months after their initial training, managers attend "Answers University" in their local district to reinforce their background in people skills and merchandising. After five years managers can attend the "Masters Class" at the RadioShack central office in Ft. Worth, an intense seminar that cover topics such as conflict resolution, hiring and firing procedures, and other specialized management topics.

SOURCES OF INFORMATION

Bibliography

Ahles, Andrea. "RadioShack Revises Its Focus." Fort Worth Star-Telegram, 20 December 2001.

"Blockbuster Deal Fizzles." Chain Store Age Executive, February 2002.

Grant, Lorrie. "RadioShack Uses Strategic Alliances to Spark Recovery." USA Today, 26 March 2001.

Krause, Reinhardt. "RadioShack Finds New Role As Cell Phone, Satellite Shop." Investor's Business Daily, 14 December 2000.

"RadioShack." Hoover's Company Profiles, 2002. Available at http://www.hoovers.com.

Schnurman, Mitchell. "InterTan May Be Looking for Buyer." 26 January 2001. Available at http://www.star-telegram.com.

For an annual report:

on the Internet at: http://www.radioshackcorporation.com or write: RadioShack Investors Relations, 100 Throckmorton Street, Suite 1800, Ft. Worth, TX 76102

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. RadioShack Corporation's primary SICs are:

5731 Retail Radio TV & Consumer Electronics Stores

6719 Offices of Holding Companies, NEC

Also investigate companies by their North American Industry Classification System codes, also known as NAICS codes. RadioShack Corporation's primary NAICS code is:

443100 Electronics and Appliance Stores