“The 80s called. They want their store back.”
During a game that called to mind the decade where the Denver Broncos got blown out of three Super Bowls, the funniest ad came from a company that has been struggling to turn itself around for more than 25 years. RadioShack (RSH). The “In With the New” spot hit the bulls-eye with cameos from Hulk Hogan, Mary Lou Retton and even Alf. Unfortunately it’s going to take more than Generation X nostalgia and self-deprecation to change the fortunes of a company still best known for selling remote control toys, Boom Boxes and speaker wire.
It’s a triumph of perseverance that RadioShack has made it this long. A physical retailer selling consumer electronics, the Fort Worth-based company has been tweaking its stores and trying to recreate its image since the early 90's when it was still selling Tandy computers. Unfortunately the efforts have never been exactly right. Half-hearted efforts to take on Best Buy (BBY) with initiatives like opening enormous Incredible Universe electronics warehouses and trying to rebrand itself as "The Shack" have never been able to get anything going with customers and build any turnaround momentum.
The company seems to be acknowledging their troubles based on a report that they are set to close 500 stores nation-wide. The news shouldn't surpise anyone given the performance of RadioShack's stock. It has shed 25% in the last year, nearly 80% in the last five years and a whopping 93% in the last ten. Likewise the company's annual profits fell from $1.9 billion in 2010 to $1.5 billion in 2012. Their 2013 numbers are expected to be released later this month.
RadioShack’s core problem is simple: it sells consumer electronics out of physical stores in the age of the Internet. Whether it’s fax machines, build-it-yourself computers, or speaker wire, the products the company is known for either don’t exist or have been shrunk down and stuck in your cellphone. To combat that image the company has been building some "concept stores" that focus more on popular products like tablet accessories, high-end headphones like "Beats by Dre," and video games. Still, a few reimagined stores and all the clever ads in the world can't change the uncomfortable fact that RadioShack’s brick and mortar business model is out of synch with modern customers.
RadioShack has caught lightning in a bottle with its throwback commercial. They’ve gotten Wall Street and shoppers to pay attention to them again, if only for a moment. Unfortunately when customers actually go to the stores they’ll find that most RadioShack locations look “retro” in the worst possible way. A clever campaign may be enough to generate a little publicity, but over the long-haul those investing looking for a RadioShack turnaround are going to be left crying “Where’s the beef?”
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- Consumer Discretionary