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RadioShack AO Message Board

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  • fastmoneypete fastmoneypete Jul 10, 2010 9:25 AM Flag

    BusinessInsider: 10 Brands that will Disappear in 2010

    Best Buy has no way of replicating the exponential boost to revenues and earnings that acquiring Radio Shack would provide. It is not a function of simply opening stores next door to Radio Shack.
    First, BBY would have to compete head on with RSH for the same customer, eroding sales and earnings.
    Second, BBY has no chance of securing leases in almost 5000 of the malls where RSH operates.
    Third, geeky or not, millions of people still choose to shop at the Shack. These customers would become BBY customers, giving BBY the critical mass to compete with WMT.
    Finally, RSH generates tons of free cash flow, and with almost a billion dollars of cash on the books, it makes an acquisition accretive to earnings almost immediately.

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    • No issue with your numbers.

      I think the problem is more one of business model. BBY has fewer, large, big ticket stores with competitive prices and a much lower gross margin. I view it as a destination, not an impulse store.

      RSH has many small stores, high gross margin (2x BBY because of very high prices) and lots of small items.

      What would BBY sell in RSH outlets? Why do they need them? Is there any kind of synergy here?

      If BBY decides to run RSH as a separate, non integrated division, why will they do any better than RSH?

      Just some considerations.