RadioShack (NYS: RSH) has been out of its mind for years, but now it's out of its head.
CEO James Gooch is leaving the troubled consumer electronics retailer. Did he resign on his own? Was he fired? Corporate press releases are so politically correct these days that one can never be sure. In the end, it doesn't matter. RadioShack's in a terrible funk, and something had to happen.
The small-box chain of 4,700 namesake stores is in trouble. RadioShack stunned analysts with back-to-back quarterly losses, but Wall Street has learned from its mistakes. It now doesn't see a return to profitability on an annual basis in the near future. After 25 years of dividends, the reeling retailer suspended its payouts this summer.
RadioShack's move to emphasize smartphones -- something that superstore chain Best Buy (NYS: BBY) is emulating with its small Best Buy Mobile stand-alone stores -- has been a disaster. Margins have crumbled, and there's less reason for repeat business. Yes, it's great to have a place where a variety of devices from the major carriers are offered, but what happens when a hot phone hits the market? We found this out the hard way over the weekend as reports surfaced that the number of iPhone 5 smartphones that Apple (NAS: AAPL) shipped to Best Buy and RadioShack weren't enough to fulfill even the guaranteed preorders. If you're Apple, you're going to look out for your own stores first, followed by supporting the official wireless carrier partners. Third-party retailers become an afterthought when supply is constrained.
RadioShack's solution earlier this month was to roll out its own wireless plans, but was that really so special? Teaming up with Leap Wireless' (NAS: LEAP) Cricket to offer RadioShack No-Contract Wireless may have been a good idea, but this is really just RadioShack slapping its name on the Cricket service.
Finding a new CEO won't be easy. If Best Buy had to overpay its CEO to get him on board -- and offer up a sizable penalty to shell out if he couldn't secure a work visa -- how is the even more desperate RadioShack going to find a worthy replacement for Gooch?
After all, RadioShack's problems aren't necessarily Gooch's handiwork. Smartphones may be booming, but it's not an easy gig as a retail distributor. After the initial sale, it's the wireless carrier that establishes a direct relationship with the customer. In other words, RadioShack is really just a retailer of wings, applauding as its patrons fly away with their purchases.
Sure, folks may come in for replacement charging cords and accessories, but it's ultimately a cesspool of crummy margins. A new CEO isn't going to change that. Finding a new CEO in the first place will be even harder.
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The article RadioShack's CEO Steps Down originally appeared on Fool.com.The Motley Fool owns shares of Best Buy, RadioShack, and Apple. Motley Fool newsletter services have recommended buying shares of Apple. 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.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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