During the Super Bowl last February, RadioShack ran an ad in which a mob of eighties pop-culture icons, including Erik Estrada, Hulk Hogan, and the California Raisins, looted one of its stores to the pounding beat of Loverboy’s “Working for the Weekend.” The tagline: “It’s time for a new RadioShack.”
Actually, it’s way past time for a new RadioShack. A month after the big game, the company reported a $400 million loss for the year. Sales had tumbled 15 percent from 2011, the last time the company made a profit. This year, sales for the first six months dropped another 18 percent. In September, RadioShack warned investors that if it couldn’t restructure its debt, it might have to file for bankruptcy. Even some of its lenders seem to think its demise is inevitable. Earlier this year, RadioShack said it would close 1,100 of its 4,400 stores to save money. Lenders blocked the deal, presumably to force the company into bankruptcy. As secured creditors, they would gain control of RadioShack and could shed whatever assets and employees they wanted.
In short, we shouldn’t expect to see a funny RadioShack ad during this season’s Super Bowl. The company may be in bankruptcy by then—if not liquidation.
The long road to this sad collapse began, oddly enough, in the world of shoes. In 1919 two men named Norton Hinckley and David Tandy founded the Hinckley-Tandy Leather Company in Fort Worth to sell shoe-repair supplies. When the United States entered World War II, Hinckley-Tandy struggled, because civilian use of leather was rationed. But Tandy’s son, Charles, who had entered the Navy after studying at Harvard Business School, had an idea. He suggested to his father that the company shift its business focus to leather craft; he had noticed that patients in military hospitals often passed the time making wallets and belts. The company, he had realized, could get a priority on leather supplies by selling craft kits to the military.
The firm took his advice, and by the time Charles joined the business, in 1947, Hinckley-Tandy had annual sales of about $750,000 from its five stores and catalog business. Not long after, Charles decided that he wanted to take the company national. But Hinckley balked, and the partnership split up in 1950; Hinckley kept the local shoe-repair business, and Charles and his father formed Tandy Leather Company, to focus on the hobby market.
Charles’s ambitions paid off. Four years after the Tandys struck out on their own, they had 67 stores in 36 states, with $8 million in annual sales. But that was about as far as a small, family-run business was likely to get, so in 1955 the Tandys sold the company to Boston-based American Hide and Leather Company. Over the next few years, Charles worked his way to the top of the merged company, and in 1959 he renamed it Tandy Corporation. He then began looking for ways to expand the business. Seeing potential in the burgeoning electronics market, he bought Radio Shack (which was then spelled as two words), a nine-store chain that sold parts to hobbyists such as ham radio operators.
The sixties proved lucrative for both branches of the business, and in 1975 Tandy decided to split them into separate publicly traded companies. A year later Tandy broke ground on twin nineteen-story office towers in downtown Fort Worth, which were separated by a shopping mall with an ice rink and the country’s only private subway. Radio Shack’s sales were booming, thanks to the CB radio craze and the popularity of its Realistic brand of stereo equipment. As many as three new Radio Shack stores were opening a day. Amid this success, Tandy spawned a number of retailing concepts, including Pier 1 Imports, Bombay Company, and Color Tile. At the same time, it became one of the more visible corporate citizens in Fort Worth: the company’s name adorns the Tandy Lecture Hall at the Fort Worth Public Library and Tandy Hall at Texas Christian University’s Neeley School of Business.
When the CB phenomenon faded, Tandy began looking for the next big thing in electronics. Radio Shack’s walls of components had long been popular among kit electronics enthusiasts, especially those building their own primitive computers. (One customer was a California prankster named Steve Wozniak, who in 1971 used Radio Shack parts to build a device that allowed him and his friend Steve Jobs to hack into AT&T’s phone network.) Spotting the coming revolution before just about anybody else, Tandy decided in 1977 to plunge into computer manufacturing, initially planning to produce 1,000 “microcomputers,” figuring that if they didn’t sell, employees could use them in Radio Shack stores. Instead, Tandy sold more than 100,000 of its TRS-80s in the first year. At about $600, the rudimentary machine helped democratize personal computing. Newspaper reporters of a certain age have a favorite story about their TRS-80 Model 100, a 1983 “laptop” with a forty-character gray-on-gray screen, similar to what you now find on a gas pump. The 100 was primitive, but it had a built-in modem, which meant that with access to a phone jack, a reporter in the field could send his editor a story in just six or seven tries. The technology was far from reliable, but it was better than the alternative: dictating a story over the phone.
With the rise of companies such as Apple, Dell, and Compaq, though, the personal computing industry grew more competitive. In the early nineties Tandy decided to get out of the manufacturing business and return its focus to retailing (and catalog sales). Charles Tandy had died in 1978, but the company hoped to recapture his genius.
Over the years, Tandy had acquired or rolled out a dizzying array of electronics retailing entities. McDuff Electronics sold stereo equipment, VideoConcepts peddled high-end home entertainment systems, Computer City was a showroom for PCs, and the Edge in Electronics specialized in portable devices like the Sony Discman. Finally, Tandy threw all these ideas together into one mega-store mash-up, Incredible Universe. But none of these stores made money. Thanks to companies such as Best Buy and, for a while there, Circuit City, electronics retailing grew as competitive as the PC industry, and Tandy could never find the right mix. Some of its stores were too specialized, others were too expensive to operate. By the end of the nineties, everything had been shuttered or sold, except for Radio Shack.
Investors, who felt Tandy had lost focus, cheered the renewed attention on “the Shack,” pushing the company’s shares to a peak of $76.88 in late 1999, from less than $20 a year earlier. In 2000 the company dumped the Tandy name completely and became RadioShack (which would henceforth be rendered as one word). The newly rechristened entity attempted to leverage its huge store network to sell computers and cellphones. It also positioned itself to be the place to go when people needed answers to technology questions, but few people asked. It offered a repair service, but few gadgets seemed to need fixing.
Worse, this doubling down on RadioShack came just as cut-rate labor in China and Mexico and economies of scale made electronics cheaper. Computers were now so cheap that fewer people were building their own devices, which eroded the hobby market on which RadioShack had long thrived. At the same time, the Internet began to undercut the efficacy of electronics stores. RadioShack execs once boasted that 95 percent of Americans lived or worked within five minutes of a Radio-Shack, but that ubiquity has become a liability—4,400 cost centers that have little reason for existing in a day and age when every Walmart, Target, and Dollar Tree carries cables and batteries and every strip mall features an AT&T or Verizon outlet selling phones on low margin.
“I wouldn’t say they did anything wrong,” says Deborah Fowler, the director of the retail management program at Texas Tech University. “The marketplace has changed. When RadioShack was doing well, you didn’t have people buying things from the Internet and people selling electronics on every corner. Everybody’s reinvented themselves.” Even the dominant electronics retailer, Best Buy, has struggled with declining sales as more customers go online.
Last year, leading up to the Super Bowl ad, the company embarked on a nationwide makeover of its stores, although it could only afford to redo about a hundred of them. The idea was to entice more customers, yet as often as not, if you walk into a RadioShack, you have the place to yourself.
Much like its fellow fallen giant on the other side of the Metroplex, Plano-based J. C. Penney, RadioShack is fighting to stabilize a concept that isn’t working. Its vague plans include same-day repair service for mobile devices, but that alone probably can’t save the chain, especially when phone manufacturers and service providers offer similar services. “I can’t see that that is a growth market,” Fowler says. “They’re really going to have to rethink their whole business strategy.”
So far, though, RadioShack’s makeover attempts have attracted neither customers nor a white-knight investor. Its bankruptcy warning has further spooked shareholders, because retailers rarely survive the process. Bankruptcy is designed for restructuring debt, and RadioShack’s biggest problem is sales.
By this fall, RadioShack’s market value was a paltry $86 million. In a cruel irony, that’s less than the value of Tandy Leather Factory, the latest incarnation of the Tandy leather business, which after a series of mergers and acquisitions is still located in Fort Worth and sells belts and craft kits out of a modest but profitable one hundred stores.
RadioShack got a reprieve in early October, when the hedge fund Standard General agreed to pump $120 million into the company’s line of credit in exchange for the right to convert the debt into shares at a later date, which would give Standard General control of the company. The deal offers RadioShack some breathing room and may keep its doors open through Christmas, but it still needs a broader refinancing of its debt and, more importantly, a new business model. “This is just a stopgap situation,” Fowler says. “Unless they make some changes and drive more consumer interest, that’s all it’s going to be.”
Others are even more pessimistic. “We think a turnaround is nearly impossible for the company,” wrote Scott Tilghman, an analyst for the investment bank B. Riley & Co., in a recent report. Tilghman has set a price target of $0 for the stock. That’s a long fall from the glory days, when Charles Tandy was one of the country’s savviest entrepreneurs and RadioShack’s management seemed to be able to see around corners.
Back in the nineties, when times were still good, RadioShack adopted a slogan that got a lot of attention: “You’ve got questions. We’ve got answers.” But these days, the questions being asked of RadioShack are pointed. And no one seems to know the answers.