RadioShack's new focus paying off

The chain of electronics stores posts its fifth consecutive month of double-digit sales gains, more evidence that the company's new strategy is working.

3 min read
Tandy Corporation said its RadioShack chain of electronics stores posted its fifth consecutive month of double-digit sales gains, more evidence that the company's new strategy is working.

Sales at RadioShack stores increased 19 percent over year ago numbers for the month of May to $294.2 million, representing the fifth consecutive month the electronics chain has experienced double digit-sales gains. Communications products such as cellular phones, direct broadcast satellite systems, and computers were responsible for the improved results, said Len Robert, president and chief executive of Tandy, in a statement.

While RadioShack isn't a powerhouse in retail PC sales, Tandy's resurgence provides an interesting contrast to the situation at computer retail giant CompUSA, as well as insights into how traditional retailers are adjusting to the new economy.

Tandy earned $52.8 million on sales of $890 million for its most recently completed quarter. The larger CompUSA, which last year bought Tandy's Computer City superstore chain, had a loss of $4.9 million on sales of $1.69 billion for its most recently completed quarter. Although net sales rose 16 percent compared to year ago results, CompUSA has posted either losses or declining profits for five consecutive quarters.

CompUSA and other traditional retailers focused on PC sales have not fared well of late, in part due to increased competition from Internet-only resellers and direct PC makers such as Gateway and Dell Computer.

In fact, recent research from the Consumer Electronics Manufacturer's Association shows that sales of traditional consumer electronics Products--things other than PCs--will reach $14 billion by 2002, or 14 percent of total industry volume. An estimated 75 percent of consumers likely to make a purchase within the next two years will use the Internet to research their purchases, according to CEMA research.

Tandy, meanwhile, has focused on selling PCs with extra education software not sold on other Compaq computers in an effort to avoid direct competition with larger stores. About 10 percent of RadioShack's overall sales now come from computers, while 30 percent come from telecommunications products, according to Ron Trumbla, a spokesperson for Tandy.

"Holistic" approach
Additionally, the company has boosted efforts to add higher margin services such as home installation of equipment such as DSL or cable modems. Today, the company said it would start carrying home PC networking products from Diamond Multimedia.

Traditional stores that "just have a large selection and low prices are going to run into competition from the Internet," Trumbla said, so RadioShack now has a "holistic" selling approach. That approach involves not only installing a fast Internet connection to consumers' homes, but wiring the inside of the homes to let televisions, satellite services, computers, and handheld gadgets talk to each other.

RadioShack isn't avoiding the Internet, however. The company has plans to offer around 30,000 of its products at its online store by this fall, according to Trubla. CompUSA has spun off its online sales operations into an independent subsidiary in an effort to explore strategic alternatives. One possibility: CompUSA will make a move into sales of consumer electronics such as video cameras in an effort to decrease dependency on PC sales.

Bloomberg contributed to this report.