Improving RadioShack to test mobile units

FORT WORTH, TEXAS —Troubled retailer RadioShack is suddenly showing signs of life. It reported strong results for its second quarter and a top analyst is expecting the company to test stand-alone mobile phone stores this fall.

Helped in part by rebate check spending, RadioShack reported an unexpectedly strong 6.9% increase in same-store sales, its biggest gain in seven years. It also produced $41.4 million in earnings for the quarter, down 12% from the same period last year but better than analysts’ expectations. RadioShack cited video games, GPS systems and post-paid AT&T wireless plans as sales drivers. It also increased payroll and added more employees to improve customer service.

Credit Suisse analyst Gary Balter praised RadioShack ceo Julian Day for turning in its “best sales quarter in a long time,” but said it could be hard-pressed to sustain those numbers going forward.

More interesting was a report from a Deutsche Bank analyst that said RadioShack may begin testing high-end, mobile phone stores this fall, a move that could help it regain market share in a category it once dominated.

In a company alert published July 17, Michael Baker of Deutsche Bank said, “Our source indicates that RSH is building three test stores due to open by October and then will hope to have 10 by the year-end, 150 in the next 12 months and 400 in three years, if successful.”

He said RadioShack would use the test to move out of shopping malls and target “higher-end, non-mall real estate so existing stores may not be suitable for conversion, despite a similar square footage.”

Baker noted that his source believes the stores will “replicate the look and feel of Apple Stores,” adding that the stores “may have access to brands not currently found in RSH stores, including T-Mobile, Verizon and AT&T.”

RadioShack didn’t confirm or deny the report, saying it didn’t comment on rumors.

Once the market leader in cell phone sales, RadioShack has lost ground to competitors like Best Buy, which now has mobile departments in 600 stores and reported a 50% increase in phone sales in its most recent quarter.