At the beginning of 2011, it looked like RadioShack s (NYSE: RSH ) reinvention
as a low-cost mobile phone retailer that dabbled in other electronics was
finally yielding results, providing the company with a strong base of revenue
growth. Earnings for the first quarter were up 4% year-on-year , with revenue
totaling just more than $1 billion, and same-store sales grew to almost 5%.
However, the company didnt fare as well in the second quarter . Profits were
more than halved year-on-year, falling from $53 million in 2010 to just below
$25 million in 2011. Revenue totaled $943 million, making for the retailers
single-worst quarter in terms of revenue since 2007. RadioShack has gone cheap
and small with its retail efforts, developing outlets like its mobile kiosks at
Target (NYSE: TGT ). It has focused on connected mobile devices as consumers
have spent less on fewer technology purchases. It has cut costs by closing its
manufacturing plant in China and consolidating. But it hasnt been enough. With
the company projecting EPS either flat or below last years take for the third
and fourth quarters of the year, its time for RadioShack to try something else.
With a recession-conscious consumer populace thats willing to spend on mobile
products, RadioShack isnt without options. The key might be in making the
companys mobile business more thrift-focused. RSH could do this by repurposing
its faded identity as a do-it-yourself retailer. Back in May, RadioShack via
its official blog announced RadioShackDIY.com: a new initiative to recapture
consumers that would visit the companys store for electrical components, wire
and cabling, fuses and other wares to build their own gear. It kicked off a
promotion called The Great Create to build a community online, with customers
showing off homemade goods built from in stick prices. The idea is sound,
actually. Companies like AutoZone (NYSE: AZO ) and Home Depot (NYSE: HD ) are
thriving despite decreases in consumer spending by appealing to
do-it-yourselfers hoping to save money by repairing, not replacing. RadioShack
is thinking too small in its ambition, though. Rather than keep the mobile
device business that has kept the company just above water in recent months, as
well as its attempt to build community through DIY electrical parts sales, it
could fuse the two into a single business. The company could encourage its
customers, through promotions like The Great Create, to learn how to repair
their mobile phones or tablet PCs when theyre no longer under warranty.
RadioShack could even make an effort to educate its customers on how to modify
their mobile phones to run apps outside of set App Stores like Research in
Motion s (NASDAQ: RIMM ) BlackBerry App World or Apple s (NASDAQ: AAPL ) App
Store. Jailbreaking mobile phones modifying them to run apps and perform
outside the manufacturers settings was declared legal by the U.S. government in
July 2010 , and its a service that mobile providers like China Unicom (NYSE: CHU
) offer to its customers upon signing up. RadioShack would be tapping a chunk of
the mobile market untouched by competing electronics retailers like Best Buy
(NYSE: BBY ). Of course, RadioShack would need the support of Verizon (NYSE: VZ
) to pursue this strategy. RSH actually rallied from the $13 range to around $16
the day it released its second-quarter results also the same day it announced
its new partnership with Verizon, replacing its long-time partnership with
T-Mobile USA. Shares quickly crumbled again, though, hitting a 52-week low of
$11.50 in August. With such a tenuous floor, investors at least need Verizon to
stay friendly with RadioShack. Any DIY-meets-mobile push would need to satisfy
not only Verizon, but its many manufacturing partners as well. But the reward
might be worth the risk for RadioShack. As of this writing, Anthony John Agnello
did not own a position in any of the stocks named here. Follow him on Twitter
at
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