RadioShack Is Winning the Race

For some companies, the only option is to be first. No matter what the consequences, they will fight tooth and nail to be number No. 1 in their race. You have to respect these true champions, as they seem capable of things the rest of us could never dream of. For RadioShack (NYSE: RSH  ) , it's a race to irrelevance, and holy cow, are these guys fast!

Slow race
When I was in high school, growing up on the west coast of Florida, where the average age is 94, I used to take part in a different kind of street race than most kids. We called it a "slow race." Everyone in town drove pretty slowly, but my friends and I would see who could drive the absolute slowest. It was like watching a combination of Fast and Furious and Grumpy Old Men.

Well, RadioShack seems to be doing something similar. Shares slumped 30% after the company released a depressing quarterly report. In a mere 52 weeks, the company has lost more than 80% of its value. This is, literally, the lowest point in the company's history -- or, at least, as far back as FactSet has tracked share data (1984). Congratulations, RadioShack -- you are the winner of the slow race!

But how? How could a company already so good at being bad step up its game and become the worst? I believe the answer is relentless dedication by management to jackhammer this company into the ground.

A winning strategy
RadioShack sells things we don't buy at RadioShack.

Read that twice, because it's actually what it does. The company sells batteries, remote-control cars, universal remotes, and other things you stopped going to RadioShack for in 1995. In recent times, the company introduced partnerships with Apple and satellite companies to sell their products. Truth be told, they weren't bad places to shop for those items because there was no one else in the store, so you got a lot of attention from the forcibly hermetic employees.

But that didn't stop the company from completely losing its marbles. When management saw Best Buy (NYSE: BBY  ) take the lead as the worst consumer electronics retailer around, they went back to the drawing board.

"How can we beat Best Buy and be just awful?" posed management.

As mentioned in a recent Fool article, Best Buy offered retention bonuses to Best Buy management -- rewarding them for doing nothing but still being there. It was a smart move for Best Buy, which was nervous that RadioShack would pull something out of the air to take the spotlight as the worst retailer.

But where Best Buy fails at being bad is that it still sells things we kind of want to see before we order them on Amazon.com (Nasdaq: AMZN  ) . Amazon's strategy is to focus more and more on media content and divisions like Amazon Web Services, which gives the brick-and-mortar retailers a chance to focus on big-ticket items. Appliances -- a good portion of Best Buy's showroom -- still merit a visit to the store, where you may end up purchasing that new Maytag.

RadioShack, however, doesn't have products that people really care to research, which is why they just buy them online, where it's cheaper and easier.

To engage the new generation of electronics customers, RadioShack needs to understand their needs. With strategic mall locations around the country, it might make sense to have service desks for things we use, even though we bought them somewhere else. An iPhone service desk, a universal-remote programming station -- things like these could actually bring people into the store, where they then buy that pack of double A's they meant to get six weeks ago. The only problem is that doing something that logical might cost the company its prized title as the worst retailer ever.

Hear, hear!
RadioShack lost $21 million this quarter after earning $25 million in the year-ago quarter. Margins were weak because of smartphone sales. Jim Gooch, CEO of RadioShack, said the company performed below expectations.

Well, Mr. Gooch, I suppose next quarter you can go from store to store and put a bunch of African hissing cockroaches in the entranceway so that absolutely nobody goes inside the store. Then you will become the Mario Andretti of slow races.

Luckily for investors, there are companies out there doing great things -- and with management that does not play the same game I did when I was 16. Here at the Fool, we've narrowed our choices down to one stock we call "The Motley Fool's Top Stock for 2012." The report is entirely free and available for a limited time only, so click here to claim your copy.

Fool contributor Michael Lewis owns none of the stocks mentioned. You can follow him on Twitter @mikeylewy. The Motley Fool owns shares of Best Buy, Apple, Amazon.com, and RadioShack. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 28, 2012, at 11:31 PM, neamakri wrote:

    "African hissing cockroaches" great sarcasm!

    Alright, another guy like me who is completely down on Radio Shack. Yes, they are stuck back 10-15 years behind the curve.

    Too bad; if they bought out Brookstone and partnered with Segway, they might last another 3 years. At least there would be a reason to visit the store to see some new stuff.

  • Report this Comment On July 29, 2012, at 11:03 AM, earthunit wrote:

    With all of the new Wall Street regulations we've seen come out over the past decades, Wall Street is more crooked than ever. Likely it will never change. It IS totally slanted against the typical individual investor.

    The only way to ever level this playing field would be to:

    1) Make all short selling illegal. It serves no constructive purpose and it's total BS that it helps liquidity. If you don't like a company, don't buy its stock.

    2) Close down all stations like CNBC that are not 100% objective. And while you're at it, tar and feather Cramer and his cronies.

    3) Make all analyst recommendations and upgrades and downgrades illegal.

    4) Only OBJECTIVE data allowed on all public companies! Read their quarterly reports, news and press releases, and listen to and watch their conferences calls, and then make your investing decisions!

    5) Close down all sites like Motley Fool that are not objective! Freedom of speech has no place in the investing world!

  • Report this Comment On July 29, 2012, at 11:13 AM, BenFE08 wrote:

    Actually, until they rid the company of Gooch and his group and get somebody in there who actually knows their head from their behind about retail, RSH is going to sink further into irrevelance.

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