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.”